Willow Tree Trading

Wednesday, 3/7/12 update

2012-03-07T17:36:00.002-06:00

Buy signal in the ES today. Looks like the selling is over for now.

Yesterday's low is most probably the A wave of Minor Wave 4. Minor W4 needs to be a flat or triangle to alternate with the double zig-zag of Minor W2. If it's a flat then prices should rally back to the recent highs before rolling over into a deeper sell off that should carry prices below yesterday's low print. If it's a triangle, then the ES should generate 4 more alternating moves (including the current one) of ever decreasing length followed by a 5th wave rally.

Monday, 3/5/12 update

2012-03-05T17:27:00.004-06:00

Sell signal on the ES today, need to see follow through.

Confirmation on the DX breakout today, but no follow through, so not there for sure.... yet.

Saturday, 3/3/12 update

2012-03-03T14:47:00.003-06:00

The SPX/ES has been in a slow upward grind in the last two weeks. The best current count has it in a Minute Wave 5 of a Minor Wave 3 rally that started on Dec 19. As a 5th wave of a rally that is in it's 3rd month and that has seen a price appreciation of around 15% in that space of time, and also with prices in the exact same area that turned the market south last May, it's no surprise that the market is struggling. The best way to count this wave is as an ending diagonal, with waves 1 thru 4 of that structure in place and the 5th and final wave itself nearing completion. Thus a top for Minor W3 finally appears to be close at hand.

Markets usually need a precipitating event to roll them over, and that event at this juncture could well be a major turn up in the value of the US$. The DX has broken above it's downtrend line on Friday, the 1st necessary step in a rally. Follow through and confirmation are yet to come. Equity values and the value of the US$ has tended to show an inverse correlation in recent years, so this could be the trigger for the bear in equities.

Saturday, 2/25/12 update

2012-02-25T15:21:00.004-06:00

The ES/SPX has been a little difficult as of late (what else is new?), but it appears fairly certain that a top of some sort is being put in place. But also and again as usual, there are a couple of ways to label the recent action.

Early this last week it looked like Minor W3 topped early Monday morning, if so then Minor W4 was in progress all week. In this case the multiple zig-zag into Thursday's low would be Minute Wave "a" of Minor 4 and the run up into Friday's high would be Minute W "b" as per the following:
If this is accurate, then Minute "c" is in progress and should result in a decent sell off over the coming week or so. One note: it is possible that Minute "b" has not concluded, it could see one more spike into the low 1370's before concluding in which case Minor W4 would be classified as an irregular flat.

There is another possibility here. The count could be labeled with Minute W5 of Minor W3 still in progress. In this alternate Minor W4 is counted as bottoming at the low of Feb 10 and Minor W5 is labeled as an ending diagonal in progress since that time:
In this scenario Micro Waves 1 thru 4 of Minute 5 are complete and Micro W5 is done or close to done.

From a trading standpoint their is no difference between the two possibilities for the coming week, in either scenario a sell off is expected. The difference lies down the road: in the 1st alternate one final rally representing Minor W5 is expected before a much deeper and more serious correction, in the 2nd alternate there would be an a-b-c sequence necessary before that Minor W5 conclusion and ensuing deep sell-off. Which will it be? Hard to say.

Thursday, 2/23/12

2012-02-23T18:03:00.006-06:00

ES did form another zig-zag, so it is a triple zig-zag into today's low:

Updating yesterday's Minor W4 flat idea:

But the run up since today's low appears stronger than would be expected, which brings to mind the thought that Minute W5 of Minor W3 is still in progress. One way for it to resolve would be in the form of an ending diagonal:

Wednesday, 2/22/12 update

2012-02-22T17:14:00.005-06:00

The pattern in the ES the last two days can best be counted as a double zig-zag. If the ES is in Minor Wave 4, then today's low could have marked the end of Minute Wave "a". There is a possibility of one more zig-zag, so Minute Wave "a" may have further to go.
Since Minor W2 was a triple zig zag, then Minor W4 should alternate with a three leg flat or a five leg triangle. The chart below assumes a flat with Minute Wave "a" done at today's low. In this scenario Minute "b" should travel back to Sunday night's high at 1369.50, Minute "c" will follow that re-test and drop down to the final low of Minor W4. Using today's low of 1353 a 2.618 multiple of Minute "a" would push Minute "c" to a low of 1326.25. This is right in the area of a .236 retrace of Minor W3 which is at 1328.50. Of course, it's quite early yet, so these projections are pretty speculative.

Also, please note that it's quite possible to see a triangle or some other type of complex formation form. A triangle would be a frustrating sideways grind, but the nice thing about them is they really clarify the possibilities once they're done - they always precede the last thrust in the longer term trend that contains them.

Tuesday, 2/21/12 update

2012-02-21T17:13:00.005-06:00

Could it be? Could it be!? A top?

Requirements for a top are met from an Elliott standpoint in the ES as of this morning, and yesterday's high print of 1369.50 is almost right on the target of 1368.75.
BUT the pattern on today's downstroke was not clearly impulsive - if this is the start of a correction today's move down will have to be labeled as a leading diagonal. So more evidence is needed.

Thursday, 2/16/12 update

2012-02-16T17:15:00.003-06:00

Updated preferred Elliott count has the ES still in Minor W3 with a Minute W4 flat type correction bottoming at last night's lows.

The Vindicator Buy/Sell continues to flop around.

Wednesday, 2/15/12 update

2012-02-15T17:06:00.003-06:00

The ES/SPX has been whipsaw hell in the last few days, but it sure looks like a top is forming (or in place). The Vindicator Buy/Sell measures buying and selling pressure using advance/decline and volume statistics, and it's telling a very interesting story. Up until last Thursday the bulls were clearly in control as evidenced by buying pressure (green line in chart) staying solidly above selling pressure (red). However, starting last Thursday the buying and selling pressure began to oscillate, which is typical for this indicator at market turns. In this case it is evidence that the bulls have lost control and the market is ripe for a decline. As with any technical analysis tool the Vindicator is not foolproof, so it is possible for the bulls to regain there grip. If there is a sell-off, the big question is what severity it will have.

Another sell signal today, third one since last Thursday. The prior two were negated by little mini rallies, so it's been frustrating. However, the intraday (5 minute bars) ES chart of today's decline is showing a very clear 5 wave impulse down, so it looks encouraging. I'm planning a short ES move, but the ES/SPX is quite oversold at this point so I'm hoping to catch it on a bounce over the next day.

Tuesday, 2/14/12 2nd update

2012-02-14T21:13:00.003-06:00

The Wave 4 flat idea from earlier today is blown out of the water with the pop up in the ES tonight. Back to the ideas presented in Monday's post, i.e. 5th wave in progress, target in the mid 1360's. Short position from earlier today was protected with a stop and reverse, so now net long 1/2 position.

Tuesday, 2/14/12 update

2012-02-14T13:42:00.005-06:00

Looking at the Elliott counts after lunch I noticed that Minute Wave 5 and thus Minor Wave 3 can be better counted as complete at last Thursday's high than as still in progress - a nice little channel can be drawn around the move up from the Jan 30 low into that high. That channel is broken by the price action late last Thursday and into Friday. Further, the move down into the Friday low has three legs, and the move up from there into today's high can also be counted as a three. We may well have already seen the "a" and "b" legs of a 3-3-5 flat formation. Minor Wave 2 was a zig zag, so this idea fits in terms of alternation. If all this is correct, the ES is in the "c" leg of that correction. A 1st target would be the .236 retrace of Minor W3 at 1315.75.

One final note, a sell signal was issued by the Dynamic Oscillator system on the SPX earlier this PM and if the ES stays below 1342 for the next six minutes there will be a sell signal there as well. (currently 1:54 PM CST)

Monday, 2/13/12 update

2012-02-13T17:24:00.006-06:00

The ES/SPX appears to be in a 5th wave of the rally off the lows of late Jan, and that move is itself a 5th wave of either Intermediate or Minor degree ( more on that in a bit). Buying pressure as measured by the Vindicator Buy/Sell has been visibly waning with a series of lower peaks since late January (buying pressure is represented by the green line in the chart) which supports the idea that a 5th wave has been in progress:

In fact, 5 waves can be counted in the move up off of Friday's lows, so it's entirely possible that a top of some significance was established at today's highs, but if so that will need confirmation which isn't yet evident.

Whether the ES/SPX is going to put in a Intermediate or Minor degree top is also an open question. The two pertinent alternate counts are as follows:

Intermediate degree

Minor degree

The Minor degree alternate seems more likely, the move up since the Dec 19 lows looks like a unit to me. Also, in the Intermediate degree alternate Minor Wave 4 did much less damage (34 vs 73 points) and was much quicker (3 days vs 8 days) than Minor W2. The difference is significant - if the ES/SPX is on the verge of a correction of Minor degree it will be much more shallow and short lived than an Intermediate degree sell off.

Tuesday, 2/7/12 update

2012-02-07T14:46:00.004-06:00

The ES still looks to be in the 5th wave of the move up from the Dec 19 lows, but that 5th wave appears to be extending. A possible target for Minute Wave 5 (green numerals) is where it's length equals that of Minute W1. Minute Wave 1 traveled 68.50 points, adding that to the Minute W4 low at 1296.00 yields a target of 1364.50.

Saturday, 2/4/12 update

2012-02-04T17:44:00.004-06:00

Pretty strong up day on Friday. What looked like a slow uneventful grind earlier in the week sure livened up. That old saying "never short a quiet market" was right on in this case.
The Minor W3 top that seemed apparent a week ago looks to be negated. There haven't been any sell offs of more than a day or two since the lows of Dec 19, and the ones that have occurred have been pretty shallow, so the most likely case is that Minor W3 is continuing to extend. Best guess right now is that the ES is in Minute W5 of Minor W3, so a top should be fairly close at hand. But caution is warranted, this thing could just keep chuggin'.

Tuesday, 1/31/12 update

2012-01-31T15:33:00.003-06:00

There's no push behind this market from either side as witnessed by the flat line in the Vindicator Buy/Sell for the last few days.

The expectation was for a flat or triangle type correction in the ES, this looks like a triangle developing - and the lack of bull or bear conviction fits that scenario pretty well. So the most likely path is more choppy and uneventful action for the next few days or so followed by a shot up towards the highs of last May.

Monday, 1/30/12 update

2012-01-30T09:10:00.003-06:00

Sell signal on the ES overnight and on SPX this AM. But we are oversold on very short term momentum indicators on a number of time frames and from a number of different standpoints, so a short trade right here is riskier than waiting for a bounce IMHO. Of course, momentum indicators can go oversold/overbought and just stay there while the market runs, but I (generally) prefer waiting for a retrace.

Saturday, 1/28/12 update

2012-01-28T11:20:00.009-06:00

The bull move that started at the lows of Dec 19 appears to have concluded at Thursday's highs. We should see a continuation of the corrective selling that's occurred since then into the middle to end of next week, but the most likely Elliott counts at this juncture indicate more bull market ahead.
Two most plausible Elliott counts at this time:

Alternate #1 (ES daily)

Alternate #1 (ES hourly)

Alternate #2 (ES daily)

Alternate #2 (ES hourly)

A quick look at the LIBOR rate and the TED spread lends credence to the near term bullish scenario. On a macro-economic level LIBOR rates and the TED spread are an indication of liquidity, higher numbers mean less liquidity and lower numbers mean more. Both have formed a top in late December after a run up that started at the end of last July.

TED spread

LIBOR

Thursday, 1/26/12 update

2012-01-26T10:05:00.003-06:00

Have we seen a near term top? Could well be, the ES hit right in the middle of the target area and promptly sold off. We're bouncing at the moment, if the ES can't mount a rally past this morning's high then things could get nasty.

Wednesday, 1/25/12 update

2012-01-25T16:08:00.002-06:00

The ending diagonal proposed in yesterday's post is unfolding close to what was anticipated. Target for the ES remains in the 1326.25 to 1331.25 area.

Tuesday, 1/24/12 update

2012-01-24T17:27:00.003-06:00

With the price action last night and today the ES appears to be forming an ending diagonal for Minute W5. Target for Minute W5 and thus Minor W3 is 1326.25 to 1331.25, and a top should be achieved some time in the next two days.

Monday, 1/23/12 update

2012-01-23T17:04:00.007-06:00

Equities continue to grind out the bull.........sausage. Bull markets have a way of grinding ever upwards and destroying all the bears in the process. And then, when the bears are exhausted - boom. This one is no exception.
Market hit a little air pocket today, but if my count is correct it's only the "a" wave of a 4th wave correction, with a 5th wave close by and yet another wave 4 - 5 sequence after that before a more significant top. Best guess as to current count (ES hourly bars):

ES 1368.75 was the high of last May and the ES is getting within spitting distance of that mark. There are two most possible alternates medium term IMHO. The first looks for a very significant top in the area of those May highs followed by a deep sell off, the second envisions an energizer bunny market. Doesn't seem to be a lot standing in the way of this market at this moment in time, so the bunny might be the correct read. But surprises are the way of the world, so hang loose.

Alternate #1

Alternate #2

Wednesday, 1/18/12 update

2012-01-18T17:22:00.005-06:00

Solid up today in equities, doesn't look good for the most bearish alternate that's being tracked. The ES is right at a downtrend line connecting the highs since the top of last May, if prices don't turn lower almost immediately that bearish alternate can probably be ruled out.

ES hourly

ES daily

Monday, 1/16/12 update

2012-01-16T15:03:00.006-06:00

The alternate Elliott counts being followed all show that the ES is in the 5th wave of the move up from the lows of Dec 19. There is always the possibility that the rally will lengthen in a 3rd wave extension. However, buying pressure as measured by the Vindicator Buy/Sell has been diverging since Jan 6 and showed a drop off at the end of last week, so the chances of a 3rd wave extension occurring appear slim at this point. So looks like some type of top in the ES is in the near term future.

Vindicator Buy/Sell
(buying pressure - green line, selling pressure - red line)

Saturday, 1/14/12 update

2012-01-14T15:59:00.006-06:00

Candy for the bears:

ES Daily

ES hourly - alternate #1

ES hourly - alternate #2

Candy for the bulls:

ES Daily

Candy for both:

ES Daily

Friday, 1/13/12 update

2012-01-13T10:01:00.004-06:00

Two possibilities right here:

Alternate #1

Alternate #2

I'm not committing just yet, watching counter trend rally currently underway. Next week is op ex, those weeks have tended towards a bullish bias, plus HATE to go short on a Friday, so we'll see.

Tuesday, 1/10/12 update

2012-01-10T08:59:00.002-06:00

Snapshot of current Elliott count (red dotted lines are projections drawn in on Saturday - couldn't resist a little bragging)

Saturday, 1/7/12 update

2012-01-07T15:49:00.005-06:00

The ES has clearly been losing momentum since the blast off from the low of Dec 19. Prices were essentially flat this week except for the gap up opening of Tuesday. So right now Alternate #3 below would seem to be the most likely outcome.

Alternate #1

Alternate #2

Alternate #3

Thursday, 1/5/12 update

2012-01-05T08:26:00.001-06:00

Short term sell signal on the ES this morning, could be bogus as the pattern down since Tuesday's high looks more corrective than impulsive. ES 1260.50 is a key level, if prices push below that it puts an entirely different light on the picture.

Tuesday, 1/3/12 update

2012-01-03T14:35:00.003-06:00

Today's rally in the ES has ruled out the triangle alternate from yesterday's post. But don't despair all you bears because there's another possibility along the same lines. It could be that there still is a medium term double or triple zig-zag bear market formation in the works as per yesterday's Alternate #3, but instead of the "X" wave being a triangle it is itself forming a double zig-zag. In that case, the ES can be counted as being in the "C" or last leg of the second zig-zag. If true, a possible termination spot would be at a trend line connecting the highs from the May top (blue line in chart).

Monday, 1/2/12 update

2012-01-02T10:18:00.007-06:00

There are three alternates right now in the ES. The first two are identical in their very near term implications but very different in their medium term outcomes.

On the medium term, Alternate #1 outlines a 3-3-5 flat type bear market structure dating back to the top of last May, with the "A" wave complete at the early October low and the "B" wave in progress. The "B" wave should top at or near the May highs over the coming weeks and usher in some pretty serious "C" wave selling. A likely target for that "C" wave would be the .618 retracement level of the Mar '09 to May '11 bull market at ES 936.

Alternate #1

Alternate #2 also has a medium term 3-3-5 flat type bear market, but that flat is an irregular flat that is marked as starting at the highs of last February and concluding at the October low. In this count the ES has completed an Intermediate Wave 1 & 2 off that low and is in the early stages of Intermediate W3. The expectation in this alternate is for a strong and extended bull market from here forward.

Alternate #2

Alternate #3 is near term bearish and the most intriguing of the three. In this count the pattern from the May high into the October low is the 1st 5-3-5 zig-zag in what will eventually be a double (or triple) zig-zag type bear market. Since the October low the ES is labeled as having formed a triangle type "X" wave with the "E" wave of that structure complete in last week's trading. If correct, that would mark the conclusion of the "X" wave and the ES should immediately tip over into the 1st leg of the 2nd zig-zag of the bear market. A likely eventual target here is the same as in Alternate #1: ES 936.

Alternate #3

Alternate #3 has the edge as of this moment due to the situation at the end of trading last Friday. At that point there was a sell signal in effect on the ES/SPX under the Trendline/Oscillator system. Further, the Vindicator Buy/Sell has been oscillating, which it tends to do at market turns, with the Sell line close to crossing above the Buy line. A cross of the Sell above the Buy would be an initial confirmation of a turn down.

Wednesday, 12/21/11 update

2011-12-21T17:08:00.003-06:00

As usual there are a bunch of possible alternate Elliott counts for the ES at this juncture. One that bears watching has a triangle being formed since the early October lows. If true, the ES is in the final "e" wave of the structure. When concluded, prices will roll over into a bear market situation. This alternate has a much lower probability of others IMO, and can be ruled out if the ES significantly penetrates the upper trend line of the triangle in the 1260 area.

Monday, 12/19/11 update

2011-12-19T17:30:00.007-06:00

The Elliott pattern since the Dec 8 top looks like a triple zig-zag into today's low and very possibly is done at that low. If so it was an almost exact .618 retrace of the rally from Nov 25 into Dec 8.

Three possible Elliott counts at the moment:

Alternate 1

Alternate 2

Alternate 3

Friday, 12/16/11 update

2011-12-16T10:45:00.000-06:00

Pattern since yesterday's low looks corrective rather than impulsive, closed long ES for now.

Thursday, 12/15/11 update

2011-12-15T08:37:00.002-06:00

Possible ES wave count. Went long ES, 1/2 position.

Wednesday, 12/14/11 update

2011-12-14T09:39:00.000-06:00

Went long ES, 1/2 position, stop @ low today @ 1206.25, could get my butt shot off but worth a flyer (heavily oversold)

Tuesday, 12/13/11 update

2011-12-13T21:27:00.003-06:00

What the ............... was that? Didn't expect the drop today. Possibly we're seeing a triple zig zag Minor Wave 2 from the Dec 8 top as per the chart below. The other possibility is that the pattern since last week's top is a series of waves 1 & 2 of a developing downtrend, which would portend some pretty serious bear activity in the very immediate future. Haven't worked up a chart for that.

A close above the downtrend line on the below chart would be a first indication of a bottom being in place and a resumption of the up trend that started on Nov 25.

Saturday, 12/10/11 update

2011-12-10T14:55:00.009-06:00

It's nice to get something right once in a while, so forgive me if I boast. The chart below is the chart presented on the Thursday update, red dotted line is my projection. As you can see, the ES read the memo and followed instructions. Right.

On to reality. Two most likely possibilities for the coming week are first, a continuation of a Minor Wave 2 correction that started at last Thursday's high or second, Minor Wave 2 was complete at the early AM Friday low and it's up, up and away in Minor Wave 3.

Alternate 1 - Minor W2 continues

Alternate 2 - Minor W3 in progress

The coming week is December options and futures expiration week, those weeks have a bullish tendency. Also, the European deal struck Friday should lift some bearish sentiment off the market, at least temporarily (that is, until everyone realizes that it's a positive in the long run, but in the short run there is still a lot of European overspending and excessive debt). Finally, December tends bullish on a seasonal basis. So the edge has to go to Alternate 2.

One other note on charting the ES. The Minor Wave 1 labeling at the print high on Thursday looks odd on the charts, but it's because TOS rolled from the December to the March contract on Wednesday evening. This can be a problem with applying Elliott Wave to futures markets continuation charts.

The fix is to examine a non-continuation chart for the next monthly expiration in the series to gain clarification. As you can see, the proposed Elliott count doesn't look quite as odd if it is applied to a chart of the March expiration ES:

Thursday, 12/8/11 update

2011-12-08T17:49:00.001-06:00

Just when you think you've got it nailed, surprise!!

Possible ES Ellliott count:

Wednesday, 12/7/11 update

2011-12-07T09:57:00.003-06:00

Looks like a flat type correction, possibly done at the low a little bit ago. Nibbled at a long ES position with a tight stop (stop @ today's low), we'll see if it works.

Tuesday, 12/6/11 update

2011-12-06T10:17:00.004-06:00

Sell signal on 10 minute SPX/Vindicator. Not going to trade this, looking to go long near the bottom of what could well be just a Minor Wave 2 correction. See ES Elliott count in 2nd chart.

Saturday, 12/3/11 update

2011-12-03T15:09:00.004-06:00

The low on Friday Nov 25 was just a tad past the .618 retrace of the October rally.
The pattern off the low of Nov 25 has been clearly impulsive and quite powerful: 115 points up from 1147.50 (= 10% gain!) to the high of 1262.75 on Friday - just 5 days. Five waves can be counted into Friday's high, that high is being tentatively labeled as a Minor W1. Minor W2 is likely to be a shallow retrace given the power of the uptrend so far. A .236 retrace of Minor W1 is 1235.50 which is almost exactly the low of Minute W4 of Minor W1. The .382 level is at 1218.75, which is in an area that has been important resistance/support in recent months.

Updated daily charts of the two most likely alternates:

Alternate 1

Alternate 2

Wednesday, 11/30/11 update

2011-11-30T17:52:00.006-06:00

Of the three alternate ES/SPX scenarios presented Saturday, the 3rd and most bearish one (near term) has been ruled out by the action so far this week. That leaves the idea of a intermediate term flat in progress since the highs of last May, or a more bullish Major Wave C up off the early October low at 1068.00. In the flat alternate, prices should trend up to the early May highs around 1375 over the next month or so, and then roll over into some serious selling for the C wave of the flat. In the 2nd alternate, a longer term bull trend is in effect which will eventually lead to the area of the 2008 highs.

Alternate #1

Alternate #2

Saturday, 11/26/11 update

2011-11-26T15:45:00.007-06:00

The selling in the SPX/ES since mid November has certainly been relentless. Wave count on this extended impulse does show that the sequence is possibly nearing a conclusion, although at least one more wave 4 - 5 sequence is indicated. Prices are currently working in the area of a .618 retrace of the October rally at 1152.50. It is quite possible to see prices stay in this area for a few days while putting in the final waves. If prices do push lower in the immediate future then the next level of support is at the .786 retrace of the October rally at 1115.25.

Updated charts on the alternate longer term ES counts:

Alternate 1

Alternate 2

Alternate 3

Given the relentless nature of the recent selling, Alternates 1 & 2 are beginning to fade in probability. This will be especially so if prices push down to that .786 retrace of the October rally at 1115.25. Both those alternates will be completely invalidated if the ES drops below the Oct 4 low of 1068.00.

Wednesday, 11/23/11 update

2011-11-23T10:27:00.006-06:00

Ouch - got my fingers burned. Long ES trade yesterday looked like a good move from half a dozen standpoints, but obviously it wasn't.
Buy signal on the SPX/Vindicator 10 minute chart was a bad one, but what should be noted is that there was not a buy signal on the the SPX/Vindicator 30 minute chart - lesson here is that the longer term trend was still down so the trade based on the 10 minute chart was against that trend - i.e. it was a trade that fought the tape, never a good idea.

SPX/Vindicator 30 minute

It should be noted that there is a divergence in the Vindicator sell line against these lower prices, so the strength of the selling appears to be waning, but it's still not over yet.

SPX/Vindicator 10 minute chart as of a little while ago:

The Elliott pattern in the last few weeks is quite interesting. Especially last week Wed (11/16) through Fri (11/18). Those few days had multiple overlaps - every corrective move up against a prior down thrust overlapped the prior sequence. There were four of those in the space of three days. The options with that were to view them as a series of waves 1 & 2 or as an unfolding ending diagonal. The ending diagonal seemed more likely, and that was my count yesterday, but price activity since then has ruled that out. What is apparent now is that last weeks overlapping was in fact a series of waves 1 & 2 marking the onset of an extended down impulse. We thus should see a sequence of ending waves 4 & 5 over the coming days.

The .618 retracement level of the October rally is at 1152.50, and at 1157.50 Minute Wave "c" is twice Minute Wave "a", so target levels for this sell off are in that area.

If we push significantly below that, then the most bearish medium term option of the three that have been getting presented increases in probability. And if we break below the early October low at 1068.00 then it becomes a certainty.

Tuesday, 11/22/11 update

2011-11-22T13:11:00.005-06:00

Buy signal on SPX/Vindicator, went long ES.

Elliott pattern on the ES has been very difficult as of late, but it looks like the correction that's been in progress since Oct 27 could well be over as of today's low at 1179.25. A 50% retrace of the October rally is at 1178.75, pretty doggone close to today's low.

Sunday, 11/20/11 update

2011-11-20T15:29:00.012-06:00

Daily charts for the ES of the three possibilities that are being followed. First two are the more likely alternates given seasonal tendencies. For more details on these alternates click HERE.

Fourth chart below is of the EURO/US$, which is pertinent given all the European troubles that have been affecting markets.

If the below count on the EURO/US$ is correct, we could see a multi month bull move in that currency pair. That would be bullish for the ES/SPX.

Wednesday, 11/16/11 update

2011-11-16T17:31:00.007-06:00

Update on three possibilities from Monday's post.

Tuesday, 11/15/11 update

2011-11-15T12:56:00.004-06:00

Buy signal on the ES/SPX. I'm inclined to go long, but there is a real danger of whipsaw here, so holding off pending a pullback. If there is a decent pullback, will need to assess it before committing.

There's been a developing triangle since the high of Oct 27. That triangle quite possibly completed it's final "e" leg at this morning's low, although it didn't reach the lower triangle trend line around 1225. So the question is, will there be just a little more selling to bring prices closer to that lower trendline?

Monday, 11/14/11 2nd update

2011-11-14T11:23:00.002-06:00

SELL SIGNAL ON SPX/ES

Monday, 11/14/11 update

2011-11-14T08:40:00.004-06:00

There are three possibilities on the ES at the moment. There are good arguments for and against each one, so it's real tough to say which is more likely.

Friday, 11/11/11 update

2011-11-11T08:44:00.005-06:00

Buy signal on the Vindicator Buy/Sell, but not going to trade this as it looks like the underlying trend is down.

Fascinating fractal pattern in last 6 weeks: double zig-zag from low of Oct 4 to top of 10/27; triple zig-zag from low of Nov 1 to top of Nov 8; and apparent double zig-zag in progress the last couple of days. Elliott theory says moves with the trend are in 5 wave structures and against the trend are in 3's - so underlying trend appears to be DOWN.

Target area on this zig-zag formation is around 1260, which has been support/resistance in recent weeks.

Wednesday, 11/9/11 update

2011-11-09T17:19:00.006-06:00

The triple zig zag postulated in Monday's post was accurate after all, although it did top at 1275.25 which is a little past the target of 1272.00.
If this count is correct, we are in a Minor W3 of the 1st (A) leg of a second zig zag down from the highs in May. Eventual target of this bear market could be at 936.00, which is a 61.8% retrace of the Mar '09 - May '11 bull market. But that's a long way away, so it's a highly tentative target.

Vindicator Buy/Sell is finally perking up, hooray!

Monday, 11/7/11 2nd update

2011-11-07T21:28:00.004-06:00

Vindicator Buy/Sell is still flat lining, it's unusable as a trading tool until it starts showing some life.

Following up on this morning's post, the pattern since the low of last Tuesday Nov 1 is choppy and overlapping, more typical of a correction than an impulse move. I know that seasonally this time of year has an upward bias, but this chart pattern is certainly not conducive to that bias. In fact, it could be that the high of earlier this evening at 1264.00 marks the conclusion of a Minor W2 upward correction and Minor W3 down is just starting. We'll know the answer by the end of day tomorrow.

Could it be that the collapse of MF Global is just the tip of the iceberg? Lots of smoke coming from the direction of CME, one get's the sense of some serious behind the scenes turmoil. Very interesting.

Monday, 11/7/11 update

2011-11-07T08:39:00.002-06:00

Covered short ES this AM, best guess right now is that the ES is in the final leg of a triple zig zag correction off last Tuesday's low. Target is the .786 retrace of the prior sell off@ 1272.00.

Curioser and Curioser 11/5/11

2011-11-05T15:12:00.007-05:00

The Vindicator was designed to be a means to measure supply and demand in equities. It is based on advance/decline and volume statistics on the NYSE. Supply is translated into a Sell line (red in the charts) and demand is represented by a Buy line (green in the charts). Generally, a bull market will generate a Buy line that is ascendant over the Sell line, and a bear market generates the reverse. Trades are indicated when the two lines cross.
The Vindicator Buy/Sell was developed just about two years ago and has proven to be a valuable trading tool over that time. But in the last week it is doing something I've not seen in the two years I've been tracking it. Instead of the Buy or Sell giving a clear signal it's been essentially flat lining as may be seen on both the 30 minute and 10 minute charts below.

Some oscillation is normal in the Vindicator, but this pattern is out of the ordinary. It began to become obvious on Tuesday this last week. I took the time to manually calculate the formulas to double check the trading platform's output and the trading platform output is correct.
I don't know with any certainty how to interpret what this tells us about market conditions other than to comment that it's probably "what you see is what you get" - i.e. over the last 5 trading days market supply and demand has been fairly evenly balanced. However, if we zoom in on the pattern and overlay the Vindicator Buy/Sell lines over the price chart it can be seen that prices are possibly on the edge of a down stroke. Note the fall off in buying pressure and increase in selling pressure apparent since Thursday's high.

Friday, 11/4/11 update

2011-11-04T14:27:00.002-05:00

SELL SIGNAL, WENT SHORT ES

Wednesday, 11/2/11 3rd update

2011-11-02T14:17:00.003-05:00

ANOTHER BUY SIGNAL - REALLY WHIPSAW CITY
THAT'S ENOUGH FOR ME, COVERED SHORT ES POSITION AND WENT TO CASH

Wednesday, 11/2/11 2nd update

2011-11-02T13:37:00.002-05:00

SELL SIGNAL, SOLD LONG ES POSITION AND WENT SHORT - LITTLE WHIPSAW HERE

Wednesday, 11/2/11 update

2011-11-02T10:22:00.002-05:00

BUY SIGNAL, WENT LONG ES

Monday, 10/31/11 update

2011-10-31T14:42:00.001-05:00

SELL SIGNAL, CLOSED ES LONGS, INTO CASH

Thursday, 10/27/11 update

2011-10-27T14:29:00.005-05:00

Still long ES from yesterday afternoon, turning into a pretty nice trade.

The diagonal ending "C" wave mentioned Tuesday is certainly off the table (not just off, but blown off!!). More likely scenario below.

Longer term view.

Wednesday, 10/26/11 update

2011-10-26T13:29:00.002-05:00

BUY SIGNAL, GOING LONG ES

Tuesday, 10/25/11 2nd update

2011-10-25T17:28:00.003-05:00

The rally up off the Oct 4 lows is possibly close to a conclusion with a possible ending diagonal for wave C of a zig-zag type structure. If so, the 4th wave of that diagonal is probably close to done with a final 5th wave to follow. After that, look out below.

Tuesday, 10/25/11 update

2011-10-25T10:03:00.002-05:00

SELL SIGNAL, SOLD LONG ES, NOT GOING SHORT FOR NOW

Thursday, 10/20/11 2nd update

2011-10-20T14:03:00.003-05:00

BUY SIGNAL GOING LONG ES

Thursday, 10/20/11 update

2011-10-20T08:52:00.003-05:00

This is whipsaw hell right now so not acting on any trade signals and staying in cash for the time being. Looks more and more like the triangle possibility is in play in the SPX/ES.

Wednesday, 10/19/11 2nd update

2011-10-19T14:19:00.005-05:00

Sell signal on SPX/Vindicator

Two possibilities here on ES, either a flat Intermediate Wave B with a target in the 1150 area:

or a triangle:

Longer term perspective

Wednesday, 10/19/11 update

2011-10-19T13:28:00.001-05:00

Stopped out of long ES from yesterday @ breakeven

Tuesday, 10/18/11 update

2011-10-18T11:08:00.001-05:00

Monday, 10/17/11 update

2011-10-17T14:54:00.001-05:00

Friday, 10/14/11 update

2011-10-14T08:46:00.004-05:00

Buy signal on SPX/Vindicator as expected, covered short ES positions but am holding off on going long for now. Looks like a 5 wave pattern up from the Oct 4 low at 1068 is finishing up, also with a 13 - 14% rally in 9 trading days a more significant correction than that of Wed - Thur would seem to be in order. Finally, the 50% retrace of the early May thru Oct 4 sell off is in the 1220 area, and we're pretty much there.

Thursday, 10/13/11 2nd update

2011-10-13T15:11:00.004-05:00

Sell signal from this morning is looking iffy at this point, could be a whipsaw. The Vindicator Buy/Sell is close to crossing back over to a buy as can be seen in the chart. Got to go with it if it happens.

Thursday, 10/13/11 update

2011-10-13T09:23:00.002-05:00

SELL SIGNAL GOING SHORT ES.

Friday, 10/7/11 2nd update

2011-10-07T12:54:00.002-05:00

SELL SIGNAL ON THE CLOSE CLOSING LONG ES GOING SHORT

Friday, 10/7/1 update

2011-10-07T08:51:00.002-05:00

Divergence on the Vindicator buy line against this morning's highs. Also, pretty strong run up over the last few days and coming into the weekend, so we could see a profit taking correction at the very least.

Wednesday, 10/5/11 update

2011-10-05T09:10:00.001-05:00

BUY SIGNAL

Tuesday, 10/4/11 update

2011-10-04T17:48:00.003-05:00

Pretty strong rally in equities in the last hour today. Five waves down can be counted since the mid-summer highs, with the 5th wave being an ending diagonal that started at the interim high of Aug 31. If this is accurate then we should see a significant correction to the bear trend of the last three months.

Saturday, 10/1/11 update

2011-10-01T14:50:00.001-05:00

Still have a sell signal in effect on ES/SPX.

Friday, 9/30/11 update

2011-09-30T09:26:00.005-05:00

1:00 PM Am out of the office for the rest of today. Awfully close to a buy signal here with buy line holding above sell line and prices close to breaking above down trend line, so am going to establish a trailing stop in the short ES position from Wednesday at +6.00.

Thursday, 9/29/11 update

2011-09-29T18:05:00.002-05:00

Sloppy, choppy - herky, jerky. Hard to trade this. Buy line crossed above sell line at the end of the day, but prices haven't broke above the trend line so still holding short. Difficult call here, but quite possibly will have to reverse from short to long soon.

Wednesday, 9/28/11 update

2011-09-28T09:47:00.002-05:00

SPX sell signal - closed Friday's long ES went short

Monday, 9/26/11 update

2011-09-26T17:37:00.004-05:00

Little dicey today, prices broke below the trend line early in the day but buy line didn't cross below the sell line. Later on that crossover did occur but by then prices were back above the trend line and rallying. After that the Buy/Sell line swapped back and forth but prices remained firmly above the trend line. So no sell signal was ever generated even though the market danced at the edge of the cliff. Nice little pop at the end of the day turned the long ES from Friday from marginal to profitable.
For today, either the SPX/Vindicator trading method was a) doing it's job because of superior design or b) lucky. I'd like to think it was option a, but more likely option b played a role.

Friday, 9/23/11 update

2011-09-23T13:06:00.003-05:00

Buy signal on SPX 10 minute, covered Tuesday's short ES, going long.

Tuesday, 9/20/11 2nd update

2011-09-20T14:54:00.002-05:00

This looks a lot better than the situation this morning. Shorted ES @ 1201.75.

Tuesday, 9/20/11 update

2011-09-20T09:11:00.003-05:00

I like mechanical trading approaches because they take the emotions out of the equation, but there are times when good old judgement and experience are dictated.
The 10 minute SPX/Vindicator system has been a solid winner the last month, but yesterday's action was not crystal clear, the Vindicator Buy/Sell is doing a lot of flip-flops, so the long ES from late yesterday PM was liquidated this morning for a small loss (long ES @ 1201, out @ 1200) and went to cash. My sense is that we are more likely to sell off here than rally, but it's not all that certain.

Wednesday, 9/14/11 update

2011-09-14T16:07:00.001-05:00

Well, it looked like we might repeat last week's pattern on the SPX - Vindicator this morning (see yesterday's post). The Vindicator buy line was diverging sharply against an early rally followed by prices rolling over later in the morning. But selling pressure never crossed above buying pressure as measured by the Vindicator and prices eventually reversed into a nice rally for the day. By the end of the day the buy line divergence was erased. In the final analysis the Vindicator did a nice job of keeping me long in the face of the selling in the morning. Me likey.

Tuesday, 9/13/11 update (PM)

2011-09-13T16:21:00.000-05:00

Last week there was a pattern in the SPX +Vindicator Buy/Sell that had a buy signal at the close on Tuesday Sep 6 followed by a steady up on Wednesday Sep 7 which was punctuated by a steep drop off in the buy line at the end of the day Wednesday. Thursday opened up with a continuation of the rally in the morning, but the Vindicator buy line was diverging sharply. Prices then rolled over into a decent sell off the balance of Thursday and through Friday.

We appear to be building a repeat of that pattern so far this week. There was a buy signal at the end of day yesterday followed by a steady up today with a steep drop off in the buy line at the end of day.
Deja Vu all over again?

Tuesday, 9/13/11 update

2011-09-13T12:46:00.000-05:00

Not exactly blowing the doors off, but buying pressure (green line) continues to build and selling pressure (red line) continues to fade.

Monday, 9/12/11

2011-09-12T15:07:00.000-05:00

Buy signal on ES/SPX

Thursday, 9/8/11 update

2011-09-08T14:08:00.001-05:00

Sell signal on ES/SPX

Thursday, 8/11/11 update

2011-08-11T17:08:00.000-05:00

Buy signal on ES from Tuesday has now been confirmed by the Vindicator Buy/Sell and in the SPX. However, the best Elliott count still shows the ES/SPX to be in a 4th wave, so this uptrend could be fleeting.

For current Elliott wave counts and other charts click the "HERE" button under the "Current Charts" banner at the top of this page.

Tuesday, 8/9/11 update

2011-08-09T17:46:00.000-05:00

ES/SPX appears to be in a 4th wave bounce after the overnight and morning lows. There is a preliminary buy in the Trend/Osc system on the ES, but it has not been confirmed in the DX indicator on the ES, nor on the SPX Trend/Osc nor on the Vindicator Buy/Sell Index so caution is warranted.

For current Elliott wave counts and other charts click the "HERE" button under the "Current Charts" banner at the top of this page.

Monday, 7/25/11 update

2011-07-25T16:56:00.001-05:00

Preliminary down signals on the SPX and ES this morning when prices dropped below the uptrend line that defined the rally up from last Monday's lows. This was accompanied by a drop below 80.0 on the Dynamic Oscillator in both indexes. The Vindicator followed along at 2 PM (CST) when the Sell line crossed above the Buy line. The long ES held since last Tuesday was sold at that point for a net gain of 21.50 points.

SPX

This is a market juncture with a high level of difficulty and thus risk. There are at least a half dozen alternate possible Elliott counts, the two I present in the chart section of the blog are the more likely possibilities IMO, but even so their probabilities aren't the highest. Adding to the risk is the news driven nature of the current situation. The best Elliott analysis and technical analysis won't necessarily anticipate a sharp major jump in one direction or another that could occur as a result of a news item about the debt negotiations in Washington.

For current Elliott wave counts click the "HERE" button under the "Current Charts" banner at the top of this page.

Tuesday, 7/19/11 Update

2011-07-19T17:20:00.001-05:00

Nice rally today in the SPX/ES. Went long the ES this morning based on Buy signal generated by the Trendline Oscillator System. The Dynamic Oscillator closed above 20 overnight and prices closed above the downtrend line a couple of hours later generating a preliminary "up" signal. Both kept climbing into the regular market open this AM where a long position was initiated. I've been using Wilder's DMI as a proxy for the Vindicator in the Futures markets, it's serviceable but not the same - the DMI is based strictly on price statistics whereas the Vindicator uses advance/decline and volume statistics for it's inputs. Anyway, the DI+ crossed above the DI- on the ES at noon (CST) today confirming the uptrend.

ES - hourly

The story on the SPX is just a tad different. Coming into today the Vindicator had been showing waning selling pressure (red line) and strengthening buying pressure (green line) over the last two trading days, particularly yesterday. So a change of trend was in the wind. This morning prices closed above the downtrend line and the Dynamic Oscillator closed above 20 at the end of the 1st 30 minutes of trading. However the Vindicator Buy line (green) did not successfully cross above the Sell line (red) - rather it topped it just slightly towards the end of trading and then fell away into the close. So caution is warranted here - this rally could fizzle.

SPX - 30 minute candles

Unfortunately I'm traveling the next few days on business and will have difficulty updating this site (I have a flight that lands in San Jose, CA at 8 PM tomorrow). I'll do my best.

For current Elliott wave counts click the "HERE" button under the "Current Charts" banner at the top of this page.

Tuesday, 6/21/11 Update

2011-06-21T17:11:00.000-05:00

The bear trend in the ES/SPX that started on May 2 has certainly been a choppy affair and very difficult to analyze, much less trade. That bear trend was quite possibly done at last Thursday's lows, and today's rally is potential confirmation of that. At this juncture there are several possible interpretations from an Elliott standpoint, none of which are very graceful. Some alternates are presented in the chart section of this blog, to view them click HERE.

Saturday, 5/21/11 update

2011-05-21T16:08:00.001-05:00

Gold appears to have completed a triangle type Minute Wave 4 on Friday.

Gold futures - hourly bars

If true, this should lead to a nice rally that has the potential to reach into the upper 1600's area.

Gold futures - daily bars

Likewise Silver has the look of a triangle over the same time period, which would also be a 4th wave but of
Major Wave degree, which means any top generated will be a much longer term top than that of Gold.
(click HERE for silver charts)

Saturday, 5/14/11 update

2011-05-14T16:47:00.004-05:00

The ES has been in a wedge type formation for two weeks now.

The ES/SPX appears to be at a major inflection point. Current Elliott Wave and other ES charts can be found HERE. The direction of the eventual breakout from this current wedge is likely to be in the direction of the general trend for some weeks to come. Given the breakdown in the commodity and currency markets and the strength in the US$ (not unrelated), the odds are that the breakout and subsequent trend are going to be to the downside.

CLICK HERE FOR CURRENT CHARTS

Wednesday 4/20/11 wrap up

2011-04-20T15:48:00.000-05:00

Sigh.
Go long or be wrong. Doesn't seem reasonable, does it? But yet, there's no denying it at this point.

ES - hourly

ES - daily

Monday 4/18/11 wrap up

2011-04-18T16:20:00.001-05:00

ES
It looked very much like the ES had turned up late last week, but SURPRISE!! Anyway, the bearish alternate discussed recently now appears to be the case (see "2nd alternate" on weekend post and Tues, 4/12 & Thur, 4/14 updates). Not only is that bearish alternate not out the window, it's sitting in the middle of the living room couch hogging all the popcorn.

That count assumes that the Major Wave 2 (blue) correction that started in mid Feb is still in progress. Major Wave 1 lasted seven months and traveled 340 points, if Major W2 were done at the mid March low it would be only about a month in duration and around 100 points in length. So it's not unreasonable for it to have more time and distance yet to travel. Also, as was pointed out last week, the underlying technicals of the mid March to early April rally were on the weak side, more typical of a B wave than a 1st wave kickoff to a significant bull run.
If Major W2 is in fact still in progress, then the ES put in the A wave from the mid-Feb top into the mid-March low, the B wave ran from mid-March into early April, and the C wave is currently in progress.

ES daily chart - bear alternate

ES hourly chart - bear alternate

AUD/US$
The AUD/US$ has quite possibly seen the top of a bull run that started in late May of last year.
Five waves up are apparent from a low established in mid-March to the high print of last Friday.

AUD/US$ - 2 hour bars

In turn, that five wave structure appears to be Minor W5 of the bull sequence dating back to last May. If correct, that concludes an Intermediate Wave 1 and thus Intermediate Wave 2 has commenced with today's sell off.

Weekend Update 4/16/11

2011-04-16T14:48:00.000-05:00

ES
Looks very much like the bull alternate presented in Thursday's update has won out.

ES - hourly

At this point the most viable alternate is that Intermediate W2 (purple) is not yet complete. In this case, the low of last Thursday would be labeled as a Minor Wave "a" with Minor Wave "b" in progress. Most likely we're looking at a flat type formation being traced if this alternate is correct.

ES - hourly - alternate

Finally, the hyper bear alternate presented last Thursday cannot yet be ruled out. If the ES keeps rallying through next week it does become less and less likely, but it bears (no pun intended) keeping in mind. A print above ES 1329 reduces the probability of this alternate by about 95% and a print above the recent high of ES 1336.50 eliminates it.

ES - hourly - 2nd alternate