I have no way of changing blogspot new chart format. If you can't see the charts and notes, you can click on "view" in your web browser and the zoom to 200% to see the charts larger. Also, to the left of the numbered chart (1 of 7) there is an option to see show original. You have to move your mouse over it for it to pop up.
Marketspath Monthly Report: Marketspath February Monthly Report
This is a look at the COT report and how the commercial traders are positioned in the NQ (nasdaq futures) Commercial traders are you large institutions, who many look at as the ones who control the tape. The large spec traders are your hedge funds that will ride the trend until they are forced out of the trade. These guys are usually pate to the party and very late to leave the party. In the chart below, it is telling us that the commercial traders have a very large short position in the NQ.
When looking back on the data that is not seen within this chart, it is actually their 2nd largest net short position in the last 12 years. The large spec traders have the largest long position seen EVER in the history of charting the commitment of traders reports. So we have the speculative late to enter and last to leave traders long and the commercial or large institutions short.
As you can see in the chart below, commercial may be on the wrong side of the market, but they are very rarely wrong in the ultimate direction of the upcoming move. The longer they are on the wrong side, the longer it takes to unwind these short positions, which typically means an extended move is coming. That would be to the downside when looking at this chart.
The chart below is how the qqq's have reacted in the past when commercial traders were positioned long or short the NQ's.
Leveraged Assets View or sentiment readings:
The sentiment levels are at levels where some major tops have hit. The leverage assets which you can see in the chart below are also at levels where we have seen big declines that have followed. Bulls are all in here and have to keep the indexes higher or we could see a mad rush for the exits as once The rydex bull/bear assets are titled heavily on the bullish side and when everybody is expecting the same thing (that would be up), we usually get some type of set back o even a total trend change, until the ratio's are back to equal.
Cash Reserves at low levels
As we know, cash coming into the market makes the indexes move higher. Cash leaving the market makes the indexes move lower. The chart below shows the different stages of of cash reserves and how the markets typical react. When cash reserves are at low levels, we could see the indexes continue to melt up, but typically at a slower rate of change than when there is a lot of free cash coming into the markets at once. We usually see that happen after large pull back or at the end of bear markets.
The cash levels are very low right now and that could have us either melting up with a slower rate of change or we about to encounter some type of deep pull back or a complete change in trend. Knowing which one is going to take place is hard, but with some of the sentiment levels and bull/bear ratio at the levels they are, I would lean towards either a deep pull back or change in trend.
Volatility Shock
The chart below from Hamzei Analytics, LLC,shows that there are some big players that believe the market is about to see some type of volatility shock, as they are invested in vix call options for March/April. If they are correct, we should see a sharp spike in the vix, which would put pressure on equities. When the vix rises, equities fall.
The Vix Pattern supports a volatility shock
The chart below is a daily chart of the Vix. It is coming off an equity sell signal and actually moved above the bollinger band. This could be setting up a vix sell signal and an equity buy signal. But the last time we saw the vix break outside of the upper bollinger band after an extended move down, like we just saw, it was followed by an even larger explosion to the upside and equities got crushed. The large bullish falling wedge for the vix is also supporting a much larger move to the upside, but the 2nd wedge needs to be taken out before we will see that type of move. It is getting close.
The Weekly VXV Bearish Count
The VXV is the vix futures and below is a weekly chart showing a potential very bullish pattern, which would imply very bearish pattern for equities IF IT PLAYS out. So far, the VXV has had a nice bounce right at the expected support area.
The Daily Tick Divergence
The daily tick chart is showing a double bearish divergence. It did turn up today, but the bearish divergences are still in play. In the past when we have seen this type of divergence, it has lead to a sharp move lower.
The intermediate term timing system is bearish
The chart below is the intermediate term timing system. There are 3 separate patterns, the first smaller pattern in yellow has played out and is part of the MUCH LARGER bearish pattern set up. The yellow patter is the smaller one that has played out already. The blue pattern is the one in play now, which is also the final piece of the MUCH LARGER pattern. The stochastic have crossed the middle line and the boxes in blue shows what has happened the previous times we have seen this set up. They have lead to sharp declines.
The swing trade system remains on a sell signal
The swing trade system remains on a sell signal. When the blue moving average on the macd for this ratio chart is below the zero line, it is a sell signal-when above the zero line, it is a buy signal.
SPX may have topped-if so, these are the targets to watch
Depending on where you draw your trend lines (wicks or body) SPX may have topped today. If it did, the targets that are posted in the spx chart is what I would expect.
IWM bearish wolfewave and potential targets
The wolfewave pattern is a pattern I follow religiously. The bullish wolfewave pointed out the target areas from the October lows and is now showing a very bearish pattern in place for IWM that would have IWM trading below the October lows if it plays out. The bearish wolfewave pattern is in red and I have pout down some potential short term IWM targets.
Conclusion:
Many money managers are telling as many as they can to get 100% invested in the stock market right here and now. They may be right in the long term, but our intermediate term indicators are saying that you may want to move to cash or at the least lighten up your portfolio if long. If you are aggressive, you can look to short this market, but understand tops are a process.
Some large traders are making big bets on some type of volatility shock to hit the markets through the vix call options for March/April expiration. With the vix in a bullish wolfewave as well as a bullish rising wedge, they may very well be correct. If we see a volatility shock hit, it will have the indexes heading lower. IWM is trading within a very large bearish wolfewave, which also supports lower levels ahead.
The commercial traders are as net short as we have seen in over 10 years. With the large institutions net short and looking for a volatility shock to hit, if you are just a long side trader, I think you will get a much better entry in the coming months. If you are a short or bearish trader, we should see a very nasty nail biting drop hit in the coming weeks. Good luck trading. G-
I am sorry, but I am moving the blogspot page into our secured page and registered the name last night. I got a message that it is still in transition and I can upload any charts. I can't apologize enough for this inconvenience. I will go over each chart in this writing, without the charts.
15 minute timing system was on an inverted sell signal for most of the rally off the lows. It went into a buy, but the negative divergences are as large as I have seen. The 30 minute timing system is in an inverted sell signal now and the 60 minute timing system is moving in the opposite direction of the indexes. It is also about to trigger a sell signal as well, but the bearish divergences are some of the biggest I have seen.
The daily went into a weak buy signal, but with the shorter term timing systems pointing lower, I believe this will be a false signal. The tick indicator which was coming off some massive bearish divergences at the previous highs, are still trading at the lower end of the range and they are also showing negative divergences.
Our new timing system is without a doubt showing negative divergences, which is telling me big money is quietly trying to exit this market without sounding any alarms. To add to the bearish case, the fear gage is stuck in the neutral zone and also showing some negative divergences. This is very strange, especially since the IWM has rallied some 6% off the lows. It is telling me that even though they are rallying here, investors are not convinced and are ready and willing to sell first and ask questions later.
The D-Date zone is here and I had November 2nd as a turn date. I was a little torn on the date as I was believing it was November 3rd for the last 2 weeks. That is why I put November 2nd +- 2 days. If today was the high turn, I would be very careful trying to pick a bottom, as it is all fitting in place as far as catching many traders on the wrong side-AGAIN. I am sticking with November is going to be an ugly month and the way they are trying to force feed the indexes higher, it is making me believe that outcome will hold true.
Many bearish wave counters are second guessing themselves and now believing we will be testing the 1370 highs before the big one starts. So if we do see a large drop, they may not believing it as well. I am seeing some indicators are follow on the side that are saying "this is another head fake move" and be very careful buying up here.
I still like the wave count that has us in a wave 2 up and the next leg down will be a wave 3 of wave 3. For any wave counters out there, you know that these are the set ups that hit the moves the hardest-which also lines up with my potential flash crash scenario. But for now, all of the timing systems are looking lower and I am on the side the next intraday drop will NOT be saved like the last 2 we saw.
NFP numbers come out before the bell, we should have a very good idea as to what they have in mind. With a 6% 2 day push higher in IWM, after a 30% 20 day run higher, I am thinking the set up is to the downside, which may be severe. Again, I am sorry about the missing charts. G-
We got the expected bounce our timing systems were looking for yesterday. The bulls used the Fed uncertainty and some rumor mill action about Ben launching some type of qe3 today to keep the bears inactive and drive the tape higher.
Now that piece is behind us and as I have said and will continue to say-The fed will do NOTHING when oil is near the 90's. But yet the qe3 ghost chasers will try and drive up the indexes ahead of EVERY fed meeting, hoping to get in before the big launch. They are now 0-10 with that game plan.
The short term timing systems are looking for a pull back and since we are heading into the D-Date time zone (November 2nd +- 2 days) we have to leave the door open that a pull back may turn into an all out decline or flash crash.
Futures are down about 9.25 as I type and are testing the intraday lows. The pattern from the lows looks like it is just some consolidation before they start bringing the indexes lower again. My first short term target for the spx is the 1180ish area.
If things start to spiral out of control for the bulls, that may just be a speed bump for our move down to the October lows, or lower. But that is the longer term road map and I will just concentrate on what is happening day by day. For now, I believe the next move will be lower. G-
The bulls took another blow today and confidence has dropped another few notches. The wave counters that were banking on this being some type of corrective wave down are now erasing that count and starting from scratch again, with the bearish count taking front and center stage.
I have been warning you about this type of reaction to all of the wave counters that were looking up to the sky as a target-and then adding a few thousand points to that level. ;)
I have also been warning about November being a brutal month and from what I am seeing, nothing has changed my thinking. We should see some type of bounce in the coming hours, but as I have repeated to you over and over again, FEAR IS MUCH STRONGER THAN GREED!!
This means whatever the timing systems are suggesting as well as wave counts, shocks will come to the downside. The most surprising piece about all of this-the spx has only retraced 38% of the rally from the October lows. It is almost as if the bulls are getting mentally prepared for what is about to hit this market. But unfortunately, some are trapped and hoping for any type of rally to get out.
I have been mentioning November 2nd/3rd for the last couple of weeks as far as a potential D-Date crash time period.That hasn't changed and I have put down November 2nd as the turn date. But stick with the +-2 day rule for this one.
There is an eerie feeling in the air and I can assure you Ben knows this. He has everything at stake here, but his hands are somewhat tied. With oil at 90 and the spx at 1220, how would he ever be able to pull it off? (qe3) I think the answer is-he can't and the street knows this very well. He would cripple our already fragile economy by driving oil to 180, if he ever tried to launch qe3 tomorrow.
So the street knows anything coming out of Ben's mouth tomorrow will be just talk. The street knows the Euro zone is on the brink of destruction. The street knows every short is basically out of this market. And the street knows, one wrong move and there is nothing but air to catch their fall.
I guess that is why we are seeing such fear in the bulls eyes, as the spx only retraces 38% of a 20% rally in 4 weeks. The hunter is quickly becoming the hunted and he knows it. But this doesn't mean we can't see some type relief rally tomorrow and it may be a very fast spike, if we see them reverse the markets off of any early weakness.
The wave structure and timing charts would actually support that type of move, as we look like we are finishing a wave 5 of (1) in this area. If they were going to try and pull a fast one, it would be early weakness-maybe deep also, which is reversed and we see a non stop bid under the market up until Ben announces..well nothing.
Another avenue they can take, is just pump the futures up overnight and gap us up and keep it heading higher into the fed announcement. But that is just thinking out loud and they may not bounce it at all and we head straight down. I am hoping for one of the above options to play out, so we can use that strength to get more short.
Whatever they try tomorrow, I will stick with-SELL ANY AND ALL RALLIES!! We should see market with a downside bias all the way into the spring of 2012-which is where I believe the spx will be testing the March 2009 lows. But we will get buying opportunities along the way, as the bears do take breaks when they are in charge. But for now, I would just stick with shorting rallies. G-
The bulls took a pretty good blow to the confidence meter today, as expected. I was not too happy about changing the re-entry of the short this morning, when that ended up being the exact high for the bounce. But we did lock in some gains from the 76 IWM short entry from Thursday.
We are still holding the (1) 1/4 size trapped short from 71, but I believe that will be a winner as well when this is all done. And we did lock in profits 4 separate times with the other short trades we covered at the lows. So overall, things continue to work with our trades, let's keep it going.
The timing systems are sniffing for some type of short term bottom soon, but there still may be some downside work left before we bounce. It should not be that much deeper than today's lows, I believe.
Spx has support right at today's lows and if they are taken out, then I expect 1243/1241 will be next in line on the downside. IWM has support at 73.65/73.46. If that doesn't hold, I would expect the bears to close the gap in the 73 area.
There are some bullish divergences forming on the regular charts and the 30 minute timing system is also showing some bullish divergences. That has me thinking we may find some dip buyers at one of the support pivots mentioned above.
The wave structure also looks like it is trying to complete the 5th wave down, which make sense with the bullish divergences, as they typically form during wave 5's. The expected bounce should retrace 50-78% of the decline from last Thursday's highs. If the bears can hold bounce below last Thursday's highs, the next push lower should be severe.
The D-Date time zone is approaching and I continue to see November 3rd as a possible day that the severe turn down starts. But like I mentioned in last night's update, I am using November 2nd +- 2 days for the turn. If the set up I believe is going to play out, trying to get the exact day should be irrelevant, as the turn very well could have us testing or breaking the October lows in a fast manner.
Looking at the bigger picture, the roadmap I am following has the indexes falling until sometime in March 2012. But there will be some very sharp bounces like we just saw along the way. But roadmap change and that is a long ways away. So we will just continue to let our timing systems to trade this market the way we have been trading.
For now, I am expecting some type of bounce to hit and we will cautiously look to short the rally. The trade set up that I e-mailed today, (get short IWM 76.80) was just for today. Please do not leave that order open and I will send out the next pivots once we find a bottom. G-
The indexes held there own on Friday after the massive ramp on Thursday. We are at levels where we should see a pull back hit. But we have the end of month window dressing Monday and usually the first couple days of the month are somewhat bullish. After the non stop move we had off the lows, I wouldn't make to heavy of a bet that we see much higher before at least a 23/32% retrace.
The wave count is looking like we should another drop with final thrust to marginal new highs. But that wave count is very advertised and if we were going to see a surprise, I believe t would come to the downside. I am still looking for November to be an outright ugly month and a very sharp very fast move to the downside.
The move off the October lows has changed most of the traders mind about the next direction of the indexes. Most are now looking for the May highs to be breached and some are even looking for new all time highs. If this is a wave 2 or B up like I believe it is, it has done its job, as it has relieved much of the bearish sentiment and convinced many that the highs are not in yet. That is exactly what wave 2's do-suck in the majority on the wrong side, right before the massive move to the downside/upside starts.
The turn date calendar was pretty much a bust this month with the new system that I implemented. But the major move was spotted near the lows and now I am seeing a major move to the downside that is scheduled for November 2nd or 3rd. Instead of looking at the exact dates for this big move (but I will still sniff for the date) let's use November 2nd +- 2 days. It could start off the next major move lower, so zooming in on the turn date area and then using the timing system should work out well to get us positioned for the move.
The crazy part about this major turn, is the next one isn't scheduled until March 2012, but we will have other along the way. So let's see what plays out in the coming days and continue to weave in and out of our positions, but stick with a bias to the downside for the larger move. G-
Wow, what a market we are experiencing live. College students may be studying our current market for many years to come. IWM's gap up was the 3rd largest in the history of the etf, from what I saw looking back. The interesting part when looking at every massive gap up like we saw today in IWM, not only were the gaps filled, but the lows from which the rallies started were taken out as well.
As far as the 30% move higher in the last 18 trading days, there is NOTHING to base this off of except the move off of the March 2009 lows. Are we repeating that time? Well that surge off the March 2009 lows, came after the Fed had pured trillions into the market to try and stop it from going to zero. IWM had come down from 79 to 34 and then rallied some 30% off those lows.
Today, IWM has dropped from 88 to 60 and then rallied 30%. There is no QE behind the move, so I would say it is very different. Does that make the move ultra bullish and we are now starting the next bull run? It might, but this still feels like a very well orchestrated, massive short covering rally wave 2 up.
Time will tell whether this is the start of the new bull, but for now, the timing systems are looking for a pull back. The tick divergence is one of the largest I have seen and the 15 minute timing system was on an inverted sell signal all day today.
The 60 minute timing system is NOT really showing a bearish divergence, so the pull back may be sharp, but brief before the bulls make another push to higher highs. But we have seen oh so clearly, these little pull backs turn into 5-6 point IWM drops before the bulls start back in again. I think we may get the same type move.
The fear gage barely made it above the neutral line and that is another piece of this move that make no sense at all. The move higher has been 100% currency driven and the large amount of shorts that were nested in the euro was the fuel for the spike today.
The news out of Europe will start to have holes poked in it and we will now start to see the market digest the news. Europe wasn't the problem for our economy, but yet now that they have found a band aide that will stick for a few hours with the Greece situation, the world is all better again. I say band aid, because that is all it is!
How do I know this is just a band aid that the real market doesn't believe? Just take a look at what the Italian bond yields did today. After dropping like a rock when the European fix was announced, they closed the day higher than where they fell from. If the bond vigilantes felt like the ECB came up with a real fix, those yields would have fallen and kept falling.
So the shorts are all but out of this market in a panic way today. The euro shorts are all but out of this market and the bond vigilantes are now starting in on the Italian yields-relentlessly!! Greece is a mere ant hole on a mountain compared to the Italian economy within the European nations. It is the 3rd largest and if the EU has to try and figure out a plan to fix them as well, everyone who jumped into this market with both feet will find themselves on a very high tightrope without the shorts as a safety net.
My D-Date horizon is quickly approaching and I am starting to believe this is really going to happen. If/when the algorithms start to jump ship, there is no buyer of last resource left. Maybe that is why Ben through out the qe3 rumor last week. Is he anticipating something nobody else sees? To mention qe3 when the spx is at 1220 and oil is at 90, just makes zero sense.
The spx has basically gone up 220 points without a breather. That means there is no REAL strong support levels to stop any declines. Yes we have some intra-day support levels, but we never really built a solid base below. That is very dangerous, as we have seen in the previous non stop rams higher.
For now, let's trade the short term, but I believe we will be able to be in a short side trade that may last longer than some are expecting. G-
The notes are in the charts. I just wanted to get this out before I left. I may have some more to write when I get back.
If you are having problems seeing the notes because of blogspots new format, which I hate, but can't change, I make the view larger. Go to the view tab in Internet explorer at the top. Click on zoom and then enlarge it to 200%. You can see the charts and notes clearer. G-
They giveth and they taketh away!! If you don't like what the tape did today, wait until tomorrow, it will probably go your way. They are being fair to both sides, as long as you time your entries and exits accordingly. The greedy traders are the ones saying "get me your most expensive bottle of champagne" one day-and then "Asti Spumante is fine tonight".
Do I want to be in "the big one"? Absolutely I do!! But trying to figure out when the "big one" is going to hit is the hard part. What looked like outright bearishness today, could be an all out bulls attack tomorrow. But things are starting to line up for my D-Date zone and I do believe we will be in on the trade when we see the markets collapse and not try and bounce.
But until then, I am fine with taking the singles and doubles and sleeping at night. So far, the timing systems have kept us true and safe. That is one of the reasons I started layering out of our short positions today.
The short term timing system is sniffing for a short term low soon, as it is showing us an inverted buy signal. The inverted sell signal took a little while to kick in, but the almost 3% drop today on IWM was worth the wait-even if we had a little stress with 2 of the positions we entered. The other 2 gave us little stress and were huge option winners for us.
Our entries on IWM were: Friday 70.85-Monday 71.85/73 and 73.25. That has us averaged in around 72.35. Being we closed (2) 1/4 positions today with some nice profits, we now have some powder to average back in if they decide to bounce it some tomorrow. If they continue the drop, we will continue to scale out of the rest of the short positions and then wait for a bounce to do it all over again.
We have had consistent singles and doubles since the first week in August when I implemented the timing systems into our trades. I am going to be early on some trade entries and early on some exits, but the system has given us consistent returns. To me, that is what matters. But don't get me wrong, watching our long trade on IWM from 60.50 go straight up to my 73/74 target hurt and it hurt bad. But we have made some profits trading the short side, even if it has been swimming up stream.
When looking at what the short term timing systems are telling me, I am expecting a bounce that fails and then another lower low. We will be looking to lock in profits during that drop.
Look to scale out of the IWM puts and tza when IWM hits the following targets. 70.67 and 70.10. That should give us some real nice gains and 2we should get some buy signals as we approach those targets. I will most likely just wait for the bounce to start shorting again. I just think there is too much out there that can happen as we sleep and we wake up to the futures down a few hundred points. G-
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