Thursday's Road Map

Either a wave ii bounce or a move to new highs underway today.  Key targets for a wave ii would be the gap fill, the 61.8% retracement (111.10, then 111.65, but, I would exit any shorts if this level (the 78.6% retracement is taken out), which coincides with the trendline off the Nov 30 lows.

Wednesday's Road Map / Closing Wrap Up

Update 2:30 c.s.t.: Let's see if the SPX tops out around 1098, its 50% retracement and the upper trendline of its channel or if that very ugly (unlikely) leading diagonal actually plays out and it retraces to 1112 - 78.6%.  Note: the alternative counts are VERY bullish and point to new highs and the upper trendline of the expanding wedge!

Update 11:50 a.m c.s.t:  What I'm looking at from an EW perspective is a possible leading diagonal for wave [i] of iii. If the SPX reaches 1093.52 quickly watch for a sharp reversal. NOT!


I expect an early morning bounce, but plan to short it aggressively. If my count is correct, then a wave iii of (iii) is due and should produce a dramatic move down in the major indexes today.  I've drawn a channel that may help identify the extent of the morning bounce at around the 38.2% retracement level, but be careful as the bullish falling wedge measures to the around the 61.8% level.

A word of caution, there are a number of EWers that have alternative counts that are very bullish from this point on, check out my links if you haven't already.  Some this move down as a completed B wave and a 5 wave push up in C as the next move for the indexes.  So don't anticipate, but take what the market gives you.  I would argue that TA favors the bearish reading, but only price pays so be careful.

Wednesday

Tuesday's road map: Updated, AGAIN

 I believe we have started at least a moderate retracement.  Whether it merely fills one or two gaps and then rebounds, thus creating another X, which will be followed by an ABC to Z, or becomes something more, we'll have to wait and see. The 60 min chart above shows a couple of possible targets - the lower trendlines, but additionally watch the gaps at 1096, and 1070 for support, as well as the 1085-9 area highlighted on the 15 min chart (right).

1:00 cst UPDATE: Although I remain short individual banks, I'm taking my profits on XLF puts today as the XLF looks to have competed iii of (i) of [iii] and could retrace the rest of today and into tomorrow. Also, today's action might create a bullish morning star (see left), which of course would need a white candle tomorrow to confirm, a bullish reversal - I doubt that happens, but I do expect some correction here.







Update:  Don't forget LBTYA, nice entry, in my opinion:

XLF, BAC, RUT update (No change in my opinion)

Over the weekend, I provided my outlook for the XLF, BAC and the RUT and things played out today pretty much just as I expected.  Beginning with the banks, and the XLF bank ETF, I pointed out the important trendline that held on Friday and pointed out that the doji painted on the daily was very close to a dragon fly and should be viewed as a pause candle rather than a reversal.  My thought was that it was created by subminuettes i and ii of minuette (i) of minute [iii]. In my estimation, today the XLF traced out micro waves [i] - [iv] of subminuette iii of minuette (i).  In other words, in my opinion, there is far more downside coming over the next several days.

BAC appears to have traced out micro [i] of subminuette iii of minuette (i) of minute [iii]. So, like the XLF I see far more downside over the course of this week.

Now, turning to the RUT.  I noted that I believed the recent positive movement in the RUT was likely a wave [ii] retracement that may or may not be quite finished.  I also mentioned that I would be watching the histogram on the daily to find a nice place to short the RUT.  Well, today's MACD histogram painted a taller bar than Friday's as wave [ii] concluded. There is a great deal of negative divergence on RUT daily, and it is way overbought on the 60 min as well.  So, I believe it is ripe to short and will look to do so on confirmation of weakness tomorrow. Specifically, I will be watching my 10 min Renko for a cross of the ADX, as well as a bearish cross of the MACD.

A look at the Russell: everyone seems to be falling in love with it

Up until this past week, the RUT has been a relatively weak index. Now it seems many have turned quite bullish on the RUT.  Maybe, my count is off, it wouldn't be the first time, but what I see is a minor wave [i] off its high, which this week retraced in minor [ii].  If this is correct, then wave [ii] has accomplished its mission of convincing most that the trend has changed.  Both the daily candlestick chart and the 10 min Renko support my count. The only question with the count is wave [ii], which could always morph into some sort of combination corrective, but if it remains a simple zigzag, then I believe there is more downside coming for the RUT.

Did the BAC Financing Cure the Investment Banks' Ills? NOT EVEN CLOSE!

[I'M GOING TO BE A BUSY POSTER OVER THE WEEKEND]


Disclaimer: (As I've noted I'm short XLF and BAC)


XLF/banks look dead to me!  In spite of their carefully orchestrated plan to prop the banks up last week, the American Investment Banks as we know them are toast!  Last week we witnessed a scheme that enabled the banksters to rob Americans of their retirement savings to transfer their wealth to the government in nothing more than an elaborately planned tax scheme.  By artificially inflating BAC, they accomplished their mission of coercing (my opinion) mutual funds to cough up $19 billion and use the money to pay back the government, in other words the BAC bailout was nothing but a tax ruse paid for by ordinary Americans.  From BAC's perspective, a near term problem solved; now they can return to paying multi-million bonuses and buying $100,000 toilets for their next CEO, because after all they are too large to fail and know they can always defraud the American masses again.

 But, let's take a look at the XLF, the darling and devil itself GS and BAC.  The banks, unlike most other indexes, in spite of the concerted effort to prop them up, did not make a new high last week and is clearly topped and on the way down.  The XLFdaily (left) closed below its critical trendline on Friday and painted an ugly bearish doji star in the process.  The best count for the XLF shows a clear 5 wave pattern down for minor [i] followed by a three wave retracement in [ii] and the beginning of the ominous wave [iii] already unfolding with minuette waves (i) and (ii), with (iii) of [iii] waiting in the wings.  No better catalyst for this wave than 1 billion new shares of BAC to be puked by investors who will not one to be the last stooge left holding.

Now let's look at GS itself; for after all, as GS goes, so go the banks.  Is all well at the evil empire?  Hardly!  Fewer charts are more clear from an EW perspective.

 And last but not least BAC.  Now that it was able to somehow raise $19 billion for the sole use of proceeds to repay the TARP, is it all better now?  Of course not.  Sure, some retail morons will think the $19 billion actually enhanced BAC's balance sheet, for after all CNBC has told them so, but wait and see how fast the institutions puke it! 

Did the BAC Financing Cure the Investment Banks Ills? NOT EVEN CLOSE!

Friday morning road map

Quick Update 9:30 am central:  Might get one more push up and a throwover of the ending diagonal, likely touching the coveted 1121, then a sell off

Job numbers just released and the markets are celebrating the less bad news. What should a bear do? Well if some one gave you keys to the federal mint, would you ask "What time do you close?" or "Where do I find the extra paper!"  This bounce is a gift that should be shorted.  Just look at the action of the EUR/USD.  I just captured this picture post announcement, the EUR is being puked (those not familiar with TOS, that big white candle at the end is a down candle it stays white until it is finished), that is not a good sign for the markets.   Good luck!

FADING to BAC!!!!!!!!!

 
Update: I'm on my way out of town, so a quick closing comment:  I hope you all took my BAC short this morning, if you bought BAC Dec 15 puts at the upper trendline they would have returned 300% TODAY!!! That's pretty good.  The market obviously went into correction mode this afternoon. The count I've been with the longest might be playing out, we'll have to wait and see.  BAC and LBTYA still great shorts btw.

 
 Update: 11:30 am: A top might be in (chart 1), but acting more like my alternative count (chart 2):

Pre-Open post:

So an insolvent bank says it's going to find enough suckers to raise $18.8 billion and in so doing will massively dilute existing shareholders and somehow people are trading this like it's good news!?  A look at BAC's wave count shows that this bounce is more than likely merely the c wave of [ii].  If this count is correct, then the next wave should create a violent move down in wave [iii].  My "alpha lines" that you see on my charts are placed there for a number of reasons, one of which is predictive.  Often one can determine the target of a move by drawing the leading line through a key retracement level or horizontal pivot, in this case I used the 50% retracement of wave [i].  I have found the accuracy of these lines increases with the number of touches that occur with the secondary lines, which are cloned from the primary line.  The 30 min chart of BAC is below: as always make your own decision, but I'm fading to BAC!

 Pre-Open                                                                                 Close: