Ordely Bull chart list 2nd aniversary reflexions.

Well, entire 2 years just passed since I started to publish my charts on stockcharts, and I am truly surprised I found time and energy to keep doing it fairly regularly. The cyclical bull was then only few months old and there were plenty of bears rampaging on the public list, so I felt compelled to dust off my crystal ball and share whatever I could have glimpsed looking at it. I can say, truly nostalgically, that it was a very easy time for the propheting. The bull was very young, bearishness was still rampant, and those in power around the world were committed to providing stimuli to the economy. Moving fast forward to today, there has been a dramatic change in all those factors. My prediction of the bull run till the Summer of 2011 was fulfilled. The powers of the word are showing such tremendous stupidity and ignorance now, that it is just my stubbornly contrarian nature that makes me looking for possible bullish resolutions.
Going back to predicting the future business, the good news though is, that we should get a pretty good clue very soon, maybe even next week.
The markets made a nice but predictable rebound to the 200 days MA and if they can't decisively break, the bear will be confirmed. If the rally continues, another leg of the bull is on the way and should last for several more months, and likely the retest of old tops at just above 1500 for the SPX is eventually in cards.

The resolution of this setup will dictate how the other markets will fare, whether the dollar, gold or crude.
Having said that, lets look at the setups in those markets.
US Dollar has made an honest attempt at the launch two weeks ago, but the second-stage engines did not fire and it failed to archive the escape velocity last week, printing in the end indecision to bearish weekly candle.

Interestingly, Australian Dollar may be drawing an inverse head and shoulders bottom.

The fate of the XAD is also closely linked with gold and the PM miners. Interestingly, the miners seem to be leading gold on this rebound/rally (that's positive).
The GDX gold miners ETF and it's younger sibling GDXJ are clearly tracing ascending wedge patterns, that could turn out to be either very bearish or very bullish (ending versus leading diagonal respectively).

Crude oil has been behaving most bullishly of the pack, but pulled just to the resistance at 100 bucks and obviously still may turn on a dime if other markets falter.

And finally, bonds may have seen a historic once-in-a-lifetime top. But that also needs a confirmation.

On the side, it will be interesting to look at all of this 2 years from now.

Weekend wrap- listening to the bell ring.

I presume you have heard or read a phrase that the bell does not ring  at the top or at the bottom. Do not believe in it, it does. It is just like the Christmas bell in the Polar Express movie, not everyone will hear it.
 To me it rung quite loudly when the DAX after breaking down from what appeared to be a triangle printed a bullish daily candle.

With US markets holding the early August low, it was quite convincing that the bottom was in. Objectively, we still are missing the confirmation of the bottom- that would come with breaking of the thick red resistance. But that is likely to happen sooner or later.
For the SPX the picture is also quite clear, breaking 1225 would confirm the bottom as well. Just notice how both indices stopped right at the crucial resistance today. Once that happen the run to the 200 days MA seems assured.

Longer-term technical picture appears on the surface still grim though, unless 200 DMA gets decisively broken, but that's the scenario I am putting more and more faith in now.
I will post more extensive review next week, time permitting.

Stupidity galore- political rambling.

This will be not-market-related. Just few thoughts about the republican presidential debate aired tonight.

Just as I started to notice some some folks returning to sanity, I got again surprised how pervasive stupidity is in the media and our political leadership.
The first idiocy I am referring to is the belief that the US budget deficit is the biggest problem that we have and I commented on that in my prior blog everybody-knows-consensus
For a shrewd market observer, it should be clear that with the interest rates near zero, the problem is the opposite- not enough borrowing by our government. With the private sector and the public on the spree of deleveraging and with "debt aversion", the US government became the "borrower of last resort". It is actually an interesting spin on the theory nicely explained by Charles Kindleberger in his book "Manias, Panics, and Crashes" that I had pleasure to read in the runup to the 2000 market top. In that book he explains the role of the central bank as the "lender of last resort". My spin is that while the European central Bank does not get that it's its role to be the "lender of last resort", our central bank (Federal Reserve Bank) does not get it that it should play a role of the "borrower of last resort", could be because there is no book written about it yet (at least nothing came my way). Not surprisingly, you could discover that the same concern of "balancing the budget" was very prevalent in the aftermath of the 1929 crash, as depicted in the "The Great Crash of 1929" book by John K. Galbraith.
Well, after getting the first idiocy out of the way, let me tell you what other idiocy bothers me tonight.
 And it bothers me very much. I guess I just can't stand cunning idiots. Two of the candidates attacked Rick Perry for issuing an executive order to vaccinate young girls against HPV (a virus causing cervical cancer and some of the head and neck cancers) in Texas. One of them is sadly a physician, and the second a woman. Michelle Bachmann then went on and on about the great harm and violation of the innocent girls that Rick Perry caused  by his order. Well, the problem is that by vaccinating you can prevent majority of cervical cancers and save multiple lives (annual mortality from cervical cancer is 4000 and from head and neck 11000). So, you can see what my problem with those folks is. Unfortunately, Mr. Perry did not handle the argument well and did not bury those two idiots the way he should. In the meantime, while I am still waiting for Ralph Nader, Rick Perry is the only candidate that gained my sympathy and respect.

Just on the side, likely a significant day in the markets today with possible bottom for Europe (US might have bottomed at SPX 1100 a month ago).

Weekend wrap- Nader for president.

The good news is that the market did not collapse on Friday and held 200 days moving averages as well as June lows. The bad news is that it may easily collapse next week and that would confirm for me the transition to a bear market. From the Elliott Wave analysis perspective it is simply a choice between two wave 5 outcomes as below.

The move in ether direction will be swift and totally news dependent.
We are in a window for this cyclical bull top and any further drop will be just a confirmation that a top was build up over the past several months and that will be as clear as it could be. In case of a surprising "solution" over the weekend a blow off rally to cap-off this bull will likely materialize in short-term.

From the political perspective it just becomes clear to everyone (if you did not know before), that we truly need protection against our own government, and the best idea I could find about that is that we should  mobilize and start molesting Ralph Nader to try another run for the Commander-in-Chief spot.

Weekend wrap- Sequential tops revisited.

It seems to be a good time to follow-up on the sequential tops theme rather than concentrate on short-term noise which is anyway just a part of the larger scheme of things and any political outcome will get interpreted according to the stock market outcome.
Just one comment: no fools in sight yet- see my old post Everybody knows-consensus.
Time has validated my contention that airlines cyclical bull has topped in November of 2010 and the sector is already in a cyclical bear, now accelerating.

Having one bear confirmed, let's look at the last cyclical bear topping sequence. I put together this chart a while back and it shows SPX top 9 months and oil top 18 months after airlines.

If that relationship is upheld this time, we are looking for SPX top in September.
I lost my gold chart so it is a recreated one. If you look closely, we may be at a beginning of a sweet 6-months rally to the top for gold and the miners.

Now a close-up of the last oil top.

If history rhymes enough we may have some rally till September followed by trading range till January where a final blow-off would commence. If the blow-off repeats its past performance it would take us to 200 bucks per barrel.
Now the disclaimer: things are not likely to repeat exactly same way.

Weekend wrap- Welcome to Pamplona.

Well, nothing beats the fun of a nice bull run.

Just do not get yourself in the way.

After this precautionary notice, let's take a look at where the markets stand now.
The very first observation is that there was a palpable spike in bullishness last week, while the markets generally had minimal net gain by the Friday's close. This by itself, even without further looking at the charts makes a good case for correction to happen next week.
The charts tell a similar message. On most of them you could see a push towards resistance practically across the board.
Just few relevant charts below before further dissecting this bull run.

Now, just a follow-up on the 2010 bull run that was a wave 5 of the wave A of this bull, with reminder that we are in wave 5 of the wave C and both wave appear to have similar dynamics, at least looking from the perspective of this (assumed) early-stage of the wave.

I placed a tentative labeling on the current wave below.

As you can see, R2K may be on schedule for about 3% correction next week. Now the caveat:
Anything much more than 3% would bring the possibility of failed 5 as on this count.

And another caveat, and the reason I put the pictures of the Pamplona run at the beginning of this post.
Bull runs can be quite unpredictable, and we can just keep going up.

Weekend wrap- wave 5 close-up.

Well, we did get some early 4th of July fireworks this year, and that's in the markets. If you look at my prior post, the scenario of wave 1 of the bear is clearly out of the window (as expected), and the failed 5th is highly unlikely now. Simply stating: we are in the wave 5 of the wave C of the cyclical bull as outlined in the last post.
There is plenty of interesting developments, including gold stocks outperforming gold (gold should bottom soon), bonds-mini-crash and euro consolidating in a triangle. But, not to waste anyone's time during this beautiful holiday weekend, I will just take a closer look at the wave 5 of the wave A, just to see what may be in cards for the balance of the summer.

Just to clarify, we are looking at the wave that started in February 2010.
As you can see, it was a very dynamic run, lasting about 2 1/2 months, with only occasional pullbacks to the 13 Days exponential MA, and the "flash crash" came after decisive breakdown of the trendline that was defined by the very first 1 and 4 days of the rally and of the 13DEMA. Now, looking at the current setup, you can see that the beginning of this wave is not so humble again, which lefts me wondering if the rest of the run will have similar features this time as well.

Obviously, that's a major conjecture on my part and anything could happen.
Have a nice holidays!

Summer Roll- Seasonal Forecast.

We had some ugly market action for the past several weeks, and it feels like there has been some severe correction or even a bear market around. However, in reality we had just an intermediate correction so far, with the decline in SPX just under 9% from the top to the through so far.
I have 3 charts showing where we may go this Summer.
In general it appears that we just made a bottom of the wave 4 of the wave C. Wave 5 of the C is just starting and may take us to the 1450 range in September. That's my preferred count.

Another count much more bearish, places us in the middle of the wave 1 of the new bear market.

While possible, I do not think this is the case just looking at the sentiment. Simply, to many bears around for wave 1 of the bear.
There is a third scenario, that is somewhat more likely, but still would not outrank the number one.

Anyway, will see. Hindsight is always 100% right.

Weekend wrap- reading the mess.

It will be a very short update this weekend, with only one chart shown. Trying to make sense and a pattern of what's has been going in the market for the past month just led me to one conclusion- I have seen it before.

There is actually a rational explanation to this pattern- distribution going on, once that done a short-lived rally will likely happen followed by more substantial decline. This actually fits my prior assumptions about top in July then botttom in August and the final drive to the bull market top in October.

Weekend wrap- it's over when it's over.

If you thought a week ago that the back and forth ride should be over, you certainly got disappointed. Just another round-trip week. We may have a better chance of breaking that pattern this coming week, but will see. Simply it's over when it's over. Same goes for this entire bull.
SPX bounced from the gap and trendline support and rode just up to the resistance of the down-sloping channel.

Landmarks for the direction of the next move appear clear: 1312 down and 1330 up.
Russell 2000 actually pierced the trendline resistance intraday on Friday before pulling back. It did manage to close just above 50 DMA which was kind of fulcrum for the swings recently.

Just to repeat my previous thesis, R2K is already likely in the topping process even if it chooses to go up for another month or so.
Poor US dollar did top for this bounce in quite ugly fashion and amongst bearish euro news. Likely to get even poorer soon (bounces included).

That leaves us with oil and other commodities. Keeping in mind that Summer is generally a bad period for this pack, this year it may be relatively nice, considering the dollar development and the fact that the correction (or the bear raid) has already happened.

One more market to cover: Shanghai composite index. I have been keeping few charts of it in my list and just added few updated comments. I still expect it to recover and rally strongly for several months. That's purely based on the look of the charts- simply missing one more leg up. It got however to the point that the rally option is now/soon or never.

In summary, the market resisted quite nicely the distribution that's going on from all the "sell in May and go away" types and should have some progress over the next few weeks. However, if it chooses to continue to correct now, we should get into a very nice patch after the mid-Summer.

Weekend wrap- commodities bear raid ending.

Well, it feels like another round-trip week, but it was actually down-up-down ride, with end result of doji weekly candles on many charts. After not very decisive decline on Monday, I put support levels on charts that worked well, and whole action of the past week was just bouncing between the support and resistance.
SPX honored its support at 1320 and appears to be drawing a falling wedge. In case it breaks down next support at 1295 should hold.

Russell 2000 also dipped to its support at 815 and bounced.

R2K truly appears to be in topping mode- even if this pattern resolves (as I expect) to the upside. It may take some time before distribution complete- tentatively in July.

US dollar is trying its best to continue to rally but I suspect  it is done for now and may start dropping from the start of the next week. The question is what will happen in July/August when more weakness may hit equities, but will deal with that when the time comes.

That gets us to the oil, gold and other commodities.
Oil did indeed held up 95 despite 4 attempts of pushing it lower.

Which brings us to what really happened to commodities over the past 3 weeks. My take is that it was as obvious bear raid as they get, brought by very obvious silver topping that gave the pretext for the pack of bears to get on the ride across the commodities. Now it appears that the second part of the run is failing, and I would expect a strong reaction to the failed raid now.
Gold seems to be leading the way.

Commodities fate is related to the Chinese stock market and I encourage you to look at few charts of SSEC  that I have in my list.

In summary, the major event appears to be failing bear raid in commodities, and hopefully some more juice in equities that I expect to show itself up next week.

Weekend wrap.

The week turned out to be a round trip, capped by the weak finish. Gold printed a weekly doji candle and oil gained a tiny bit despite some rise in the dollar. The chart for the SPX is as interesting as they get, with several technical patterns in play.

There is an inverted H&S consolidation with a breakout and now the neckline being retested- a bullish pattern. There is also a support from the blue trendline. On the other hand there appears to be a deja vu of the pattern seen in February/March as encircled, suggesting that quite a bit of selling may still be in cards short term, with support around 1295. In support of this resolution is the non-impulsive pattern of the wave from March lows, and best fitting count  would be an ABC correction as marked. Back to the positives again: the uncertainty should be resolved rather quickly when the index breaks either blue or the red trendline. Anyway, SPX did not arrive yet to its top for this bull and more rally will eventually follow.
Russell 2000 is hanging on the support and could drop easily by 50 points if that's the direction of the move. If that happens we may be seeing actual top in making for this index. Just to be clear, bounces and retest would happen but just to complete the distribution process.

 US dollar had another decent week, pushing into resistance zone but target of around 62 still stands, and commodities should start picking up soon.

Oil held 95 and may have completed its correction, with the caveat that a final drop to the 200 DMA, currently around 90 may be a risk.

Silver printed weekly long-legged indecision doji candle and is simply writing its own story, that will be a legend for future generations. Near term a transition into a trading range as noted in the last weekly update is likely, with the caveat that early drop next week may push it down to lower level supports around 27 and 24.

In summary, after the indecision last week we may get some direction next week and that should be apparent early on. R2K is at risk for having topped out but I do not believe that top for the SPX yet arrived and commodities and gold should start rallying soon.

Weekend wrap.

Stock market suffered relatively modest selloff and commodities a true panic this week. All with a bounce of the dollar from a very oversold position and a minor support. This appears to me like a nice reset of the recent froth.
SPX remains in an uptrend with good support both from the trendline and support zone that covers 1320-1340.

The bottom spotter gave a fair (could be better) signal on Thursday.

Russell 2000 also still looks good, finding support at the trendline but any further drop could be a problem.

US dollar bounced after several bottoming candlesticks and commodities selloff already underway. It did not even get to the 50 days MA which is currently around 75.5 and that's highest I would expect it to go.

I will spend more time on commodities in this update, since that's where the action was this week.
I have been watching a potential rising wedge in Oil, expecting it to complete in June-July in time for the Summer correction, but last week made it clear that it was not a wedge but a flat, as you can see below.

This correction in oil corresponds to one in Oil Services, where it is more pronounced and clearly a continuation (or rather completion) of the process that started in early March.

My take is that we have seen the correction in energy expected for the Summer months already and the "Summer low" is in.
 I will mention Airlines here, since they trade contra-cyclical to oil and are in a bear market until proven otherwise. My suggestion is: do not get suck in.

Silver did not heed my good wishes and did what silver does well- sold off violently, landing at the support which should hold.

For its own sake silver should consolidate for a while between 48 and 36, and if he listens to me he would have a good chance for new highs later on. Duration of that consolidation is uncertain and could be weeks, months or even years. In the meantime, such consolidation if traded properly should be more profitable that an uncontrolled run.
Natural gas is getting on my nerves, but that's hopefully for the last time.
In summary, we just had an interesting but healthy week- if my take on it  is correct.