apr 30

8:40 a.m bsy cracked the triangle upwards. PM(phillip morris) chart looks good too.

10:10 a.m. DIS flying as noted yesterday. No position on it though. Have small positions in PM & NVS.

10:50 a.m URRE hit 1.60. 100% within 3 days. Too bad, we sold 90% way too early at 1.07. Holding the rest since that is kind of free stock, since our capital (and some) is back in our pocket.

11.00 a.m. GILD has all the marking of a wave 3 of wave 3 down. So does SLV and GLD.

1:50 a.m. GILD can't catch a BID. That is how a 3rd wave should look. In the next few days/weeks we expect GILD to sport a nice gap down below 44, completing a head n shoulder. We are in the green on GILD now. The MA stars are also looking like aligning very soon. We lowered our buy loss accordingly (47, from 48 close). Sometimes the markets seem very wicked to us - despite the overarching hype of flu and blowout earnings, GILD is going down.


6:37 P.M We opened small trades in NVS and PM today. We will bail on a closing break of the moving averages. The market is overbought and can correct a bit. Our cycle turn points to a low during the week of May 11th. So maybe that is what is occurring. DIS made a nice run today towards its 200d. We believe the SPX can run towards 950-1000 in the coming weeks. The intermediate cycles don't turn until late june. We will then look aggressively for the short side. As of now, we are happy scalping here n there. GILD has finished a complete 5 wave down on the hourly scale. So it may get a temporary respite for a day or two (probably upto 47 or so). It should not cross the highs of two days prior. For bears, this will be a yummy shorting opportunity as the 3 of 3 (hourly) is coming up very soon on GILD. We should see the 44 shelf break down on that move.

Drugs are good

Above is a monthly and a daily chart of novartis (NVS). We believe novartis is in the early stages of a nice rally for the next few months, upto 45-50 or so. 

Lets look at our arguments for it.

Daily chart :

1) NVS just broke a down trend line from 5 months on decent volume surge.

2) Daily moving averages stars (pps>5>20>50) are aligned alright, making a case for the rally upto the 200d. 

3) Our preferred EW labelling has us in the wave 3 stage of the C corrective wave.

Monthly chart:

1) NVS made its all time high in 2006, and as per our preferred our ew labelling has finished a huge corrective wave of A

2) The bottom in march (~33) was in the area of the previous 4th wave triangle as well as a bounce of the 200 month moving average.

3) The monthly stochs are turning up, the weekly macd has crossed over.

All in one, things looks good here for NVS. We would buy it with a daily close stop below the daily average neckties (say a break of 36). The target is around 45-50 in a month or two. Risk/Reward wise the trade is set up very nicely indeed.

BTW, the company seems to have a stable dividend of > 4%.

Apr 29

10:45 a.m Looks like XLE is breaking out of the triangle and SPY is rallying. Keep an eye on UNG for a cross above 20d & 50d. We may have /are in a bottoming process in natural gas. What more, we have bounced exactly of the 20 year trendline at 3.19 (see our post a few days ago on this). Sometimes, it feels incredible that the market knows and respects a 20 yr trendline. As for the markets, could we see 900? Sure. We use a hedged play, we added some XLE again on the breakout of the triangle. We will keep adding SPY shorts every 25+ points or so.

11:24 a.m. sold 90% of our URRE(@ 1.07) bought at 0.63, which we bought a while back now (2 months? - sometime in Dec-Jan)

11:55 a.m. Out of ERX & XLE from the morning for small 3% & 0.75% profits respectively. Double top region, yes we can blow through, but it also attracts sellers. So, yes we can (scalp). Also, we don't have the balls to hold through the FOMC announcement.

12.20 a.m. Looks like another long bull flag.

Feel free to ignore:
WSJ & CNBC had an article saying h0w the rally was fake and things are going to worse etc. Again, at the risk of playing contrarian (which comes easily to us all :-)), in 2008 May, they were saying it is a correction in a bull market, now they are at the other end of the spectrum and the newsletters don't believe this rally. This rally has defied all the bear logic thus far - ascending wedges, various trendlines at various angles, moving averages, low volume, turndates, cycle dates. Such skepticism is probably healthy for the rally to continue. Lots of technical charters (ourself included) have drawn in an ascending wedge and were looking a nice fall to get in. Too many shorts got caught on the silent run from 666 (remember we strongly hinted towards a no-capitulation style rally). Being a bear is still in vogue. DSI (bernstein's) daily sentiment index is buzzing at 60%. So, there is still some room on the upside sentiment wise (according to us ofcourse).

2:26 p.m Sold 90% TBT from the purchase 2 weeks back (we did a post about this) for a 10% profit.

6.00 P.M XLE has proved to be very indicative of the market action. We suspected a rally breakout and that is what we got. The action today in XLE broke above the triangle. We may have a pullback no doubt, but that will be a buying opportunity as long as 842 holds on the SPX. We'll continue to scalp watching the hourly moving averages. We are quite overbought short term so a pullback can ensue anytime. As long as 842 (the low) on monday holds, this market will rally.

Lets look at DIS (disney) as a random stock pick. This broke out of a sideways month long consolidation. The bears would have possibly played this as a possible Head n shoulders. We fully believe DIS can make it to the 24 region (the 200d) MA in the coming weeks. This is classic sector rotation in progress. Some of the tech stocks which have already run a long way will probably go down little or chop around (e.g. AAPL, AMZN), while relative laggards thus far (for e.g. DIS) can run.

Apr 28

11:20 a.m. We are quite busy this week and next. Just had time to look at the daily charts. It looks like a distribution pattern around 86-87 SPY. We entered a small SPY short for a swing trade. Our next daily cycle low is in the week of May 11th-18th. We believe the intermediate term will have more rallies until Last week of june-early july. That is when our intermediate term cycles turn. But I guess we'll cross the bridge when it comes.

10:30 P.M busy day today. Just added a small sliver of SPY short for a long term swing trade. The market has been very crazy and the picture is mixed. The mclellan oscillator is signalling a huge move ahead in the next day or two one way or another. Lets look at some sector specific SPDRs.

XLE - We have noted before, the chart doesn't appear bearish to us. It looks like a consolidation before another leg up.

XLU - similar looking chart.

SPY - We have been in a tight upward parallel channel since mar27 and today we bounced off it again. So we may get another bounce soon

While MACD and other momentum indicators are overbought/ bearish. The bearish setup is there but there doesn't seem to much action one way or another. The picture isn't clear to us. So we'll keep trading to a minimum, which suits us since we are busy this week :-).

apr24

8.00 a.m maybe slightly busy intra day today. But the strategy is simple and to watch the hourly trinangle give way. Something to keep in mind - cynicism is the fuel needed to rally.

11.40 a.m. Just had time to take a quick peek. Whoa! our energy buy orders got filled in the morning. We are riding the green energy worm (pun intended), as said yesterday. Looks like our energy analysis yesterday was spot on. Lets see how far it takes us. Until now, all things look good.

2.00 P.M For bad or worse, out of longs for a 2% profit
2.03 P.M Lots of volatility. Letting things settle for a bit. Will reenter longs on MA crossover on 5 min,.

2.30 P.M Insane whipsaws going on. Not for us.

3.00 P.M XLE breaking out, hopping on it stops in the now broken double top region (~46.25)

3.15 p.m. Taken out. No more trades for us today. Off to enjoy the nice friday weather.

Energy

There is something definitely going on in the energy complex. Lets look at some of the names COP, CVX, XLE. CVX counts nicely with the EW labelling shown or as a a-b-c-a-b-A upmove followed by a long, slow b wave down. The picture is similar in cop. Even better the weekly chart of XLE looks like a flag/pennant in the uptrend. The daily stochs are just turning up now. Could this mean off to the races for the energy names? Could this be the leader for the SPX to go up negating the bullish wedge? Well the energy sector looks willing technically. Lets see what happens. If the pennant  is broken on the upside in CVX, we may go long with a stop underneath the lower edge of the pennant. 

 

Lets look at timing . Our next cycle date is a low in the week of May 11th. 

Sentiment:-

Ofcourse playing contrarian without proper sentiment indicators is risky, but doing so anyways... Literally every blog, every news channel is calling for a pullback. Lots of technical traders recognize the bearish wedge. Everyone is skeptical of the stress test results (maybe rightly so).  Almost no one believes the bank earnings (maybe rightly so). What is a bear market rally if it doesn't make sentiment bullish. If the SPY goes up above 861 instead of breaking 840, the thrust upwards can easily make the 940s. Our strategy is to remain nimble and watch for the triangle on the hourly to break one way or another, for the move could be explosive.

mid day apr 23

10:30 a.m. sold 80% TZA at 34.54. Will reload higher.

2:50 P.M The bull just won't die. The least we can do is not get gored by it. Covering tza right in the morning was definitely worth it. That being said, the market is again heading into the 20/50 hourly necktie. We need to the 15 min 200MA to break. It just seems too strong, providing kick back rallies.

5:20 P.M Yesterday's mirror image. The best thing is to let the market speak first. It could be that the weak short hands (like us) are getting shaken out (albeit for a > 5% profit today). But we prefer to let the market speak. Maybe too many people noticed the bearish ascending wedge. If the market indeed negates the bearish wedge pattern by rallying above yesterday's high ~860, we can easily see a huge rally courtesy of a panic short squeeze. As a bear, I would like my nemesis the 15 min 200d MA to give way first (~ 841 today). Until that gives way or 861 gives, we will sit and observe shorts claiming commercial RE is the next shoe to drop and longs claiming that it is already factored in.

8:30 p.M The hourly chart shows a symmetrical triangle being formed over the past 3 days. We  could have another day of whipsaw within this triangle. When it unleashes, we could have a powerful move one way or another. The key is to exit on break of the edge.

Mid day Apr 22

10:20 a.m. Markets really strong. 857 is 61.8% retracement. If it goes above that, we will close out our SPY shorts on a loss.

11.20 a.m. looks like a bull flag on the SPY. Cut and run (loss of 3%)

12:47 Market reversing. Looks like we got faked out. But still holding above hourly averages. Will wait for bearish crossover for entry if it occurs.

2:30 P.M Ha, the moving averages necktie act as support. It was wise to wait for the bearish crossover.
On a more sentimental note, quite a few people whom I have talked to, still don't believe the worst is over and that the bottom will be tested. While playing contrarian
comes "naturally" to everyone :-), can it be that we rally some more ?

3:45 P.M That was answered pretty quickly, entered TZ A at 32.45. Necktie broken at least intra hour. Looks like red volume is massive too.

The widowmaker

This is a more of a watchlist post for natural gas. We would like to add a disclaimer out front.

Natural gas was a major loss for us last year and we ended selling for a tax loss. So our record is nothing to be proud of in this commodity. This commodity is also a graveyard for quite a few hedge funds and is a huge, huge volatile market. So as everything else, take it for FWIW.

We take a look at two charts a long term monthly chart of 20 years and a daily chart of 1 year.

As seen in the monthly chart, natural gas has an upward sloping trendline from 15+ years coming in @3.2 region. We believe natural gas could bounce of that level. The daily chart shows an EW labelling (there is probably another way to label the subdivisions), but the take away is we are in the final throes of the downtrend for now. The seasonal chart above shows natgas usually bottoms in july. So we will keep a lookout nevertheless.

Ofcourse, divergences have been showing up for a long time in this market. While this is definitely a setup, we need a timing trigger to log a buy in, probably a bullish MA cross or a weekly/2 consecutive closes above the 50 d MA, which has proved to be natgas' trendsetter.

We are keeping this on our watchlist as the commodity has been selling off without a bounce for an year now. The coming rally could be vicious.

BSY

This one caught our eye for an easily recognizable pattern while scanning some charts.

Above is a chart of BSY. The chart has been forming a symmetrical triangle, possibly in the wave '4' position.  We will put it on our watchlist and keep visiting it regularly. This could be a nice short once the lower edge of the triangle is broken for an explosive wave 5.

GILD - updated EW labeling

Gild released results, looks like they beat handily and the stock is up AH. We don't think this stock is done going down yet. If anything, we will look to add to our short position.

As per our labeling, GILD may rally for the next week or so, upto 47-48 in a wave 2. If this is indeed true, we will be looking for head n shoulders on GILD to form. As of now, we are missing the right shoulder.

The moving average "stars" are aligned to the downside. GILD has to strongly close above 48 to disturb this picture.

We believe GILD is on the precipice of a 3rd of 3rd move down which should commence in the coming few weeks and will continue to hold/add shorts if we get another timing trigger. 

mid day Apr 21

10:00 a.m covered another 10% of spy short and JPM short. Looking to add some shorts higher (~840?)

12.00 noon Picked up a sliver of SPY short at 84.25. Will add some more as the move goes higher.

3.00 p.m. The market is really strong. More green volume than yesterday. If the market closes above 850 (the underside of the wedge), we will close our SPY shorts for a loss.

3:15 p.m The key is to watch the hourly charts, the 20MA and the 50MA are in a necktie and acting as resistance. If that gives way, we are going to have another run at the high. This also coincides with the wedge underside. So all in all, it is a key resistance area. For bears this should not be broken.
3:20 P.M Added another sliver of SPY short at 85. Now will wait and observe the action, if the market closes above the hourly 20x50 MA necktie, we will take a loss on our SPY short until the picture becomes clearer.

4:10 P.M SPY could not break the necktie. The volume today was lesser than yesterday. Underside of the wedge was not breached. Thus, the bears must still be the favorites. We will swing our shorts.

Mid day - Apr 20th

12:30 P.M Took a huge short positions on SPY in Pre market. Covered 50% at 840. Letting the rest the ride out. A close below 848 (wedge border) is what we (the bears) need. Anything above and it would be a fakeout. First target is the 20 MA. Will take off another 20% at that place.

3:55 p.m waterfall that is what it has been today, Looks like the wedge is positively broken, we may get an attempt on the underside of the wedge over this week. If at all, it would be a shorting opportunity.
Trade: took profits on JPM shorts. Leaving 20% of position on.

Week of truth

Above is a chart of the SPY. We think the market is at a key juncture (probably too many).

As can be seen there are just too many lines in the 88-89 region that both the bulls and bears know it is a key area. Also the market has been following cycles to a "T". As can be seen the market has been rigorous about turning every 30 days and on one occassion 45 days ( a fibonacci 1.5 x 30). Monday (If my counting is right) will be the 30th day in this uptrend. Given that we are at the key juncture on so many trend lines makes it even important.

As shown in the chart above the 88-89 region is the "region" in the sand. If the market conquers the area, we can easily ride onto the 940 region. 

Now, for the bearish scenario. The internals of the rally, the Advance-decline, volume, RSI have been coiling up/ waning in strength. So, the bear case definitely looks good. The bearish ascending wedge is clearly visible, may be too obvious. So probably every technical trader is waiting for a breakdown. Our strategy is simple, we will wait for the wedge to break before going long or short one way or another. If the wedge breaks down 780 -760 is the first target so there is ample room to fall. On the upside, we believe the double top 943 is the target. So again there is ample room. The key is to watch the hourly moving averages to direct our trading.

Feel free to ignore:

While we don't know whether to believe Armstrong's confidence model and his theories

http://www.contrahour.com/contrahour/2006/06/martin_armstron.html

is quite an interesting read. According to him Apr 23rd we will a D-day. Apr 20th is close enough. 

On a side note, If the decline does happen, the astro gurus (some of my fellow traders) will be all over me, telling me I told ya so (on Apr 17th) :-)

Apr 17th Weekend update

Coming soon over the weekend...

After reviewing some charts AH, we think we may have found enough material for a nice powerful move next week, one way or another, we now prefer the downside. But we will try and run some cycle models over the weekend to see what the cycles are telling us.

Mid day Apr 17th

11.20 a.m Key day according to the astro gurus. Lets see how good they are? That being said, the VIX is getting awfully close to a 20 month MA (~ 33). Definitely expect a strong bounce off this.

5.00 a.m Divergences galore. But the price still keep going up. The mclellan oscillator recorded is getting wound up in a triangle. Something is going to give very soon for a drastic move. We like the downside. But we will wait for the ascending wedge line to break before trying to be a "hero". The astrogurus missed today - may be right on monday, who knows?

Mid day Apr16

10:30 a.m Just had some time to look at the screens in the morning. Entered a small JPM short position at double top of 33.4. We think this could go back to 25 or so over the next few months.

2:30 p.m Stopped out of the rest SPY shorts @86 for a healthy loss. Net even on the trade. This market is too strong. Still have JPM and GILD shorts though, they are still about even/slightly green.

3.00 p.m What about the wedge? May be everyone realizes it is a wedge - meaning it is too obvious for its own good. So we switch to waiting and watching the hourly moving averages for buying/selling opportunity. As of now the boat has been missed to the upside. A side note, we have a few fellow traders who use astro technicals to trade. They claim apr17th is the venus direct and we could see a significant turning point on 17th. Take the info FWIW, as everything else.

3:40 p.m VIX 5min (5MA is about to make a bullish crossover into 20MA). Expecting a huge sudden down move. Still watching.

3:50 p.m wow the VIX signal doesn't fail. Smells like massive distribution is going on. Still watching, if we get a confirmed bearish hourly MA cross or topping candle to put on a swing trade. Rumour has it that a short hedge fund is facing redemption and margin calls. haha is that karma ??

3:58 Clear sub minuette 5 wave down. Meaning the trend on the minute scale is down. Will the astro gurus be proved right ? We are not betting on any side yet. We will watch for our a technical MA crossover, for the index short or the wedge breakdown.

4:10 GOOG hit 50 W moving average.

11:50 P.M Added a little bit of spy short to our long term hold. For this type of holding, we'd stay away from ultra etfs. The spdrs are much better index trackers. We fully well think 600 is doable in the next couple of years. Our goal is to keep trading in & out of spy shorts to have a monster spy short (ofcourse hopefully built purely on profits of these short term trades :-)) by fall time.

GILD

Above is a daily chart of GILD with what we think is the EW labelling.

GILD broke an important trendline today. We have been eyeing GILD for sometime now as a potential tasty short. 

We missed entering this position at the break of the line today, as were away. 

Nevertheless we initiated a small short position, sometime later in the day, though not an ideal spot.

As is often the case, GILD may try to test the underside of the line. We will probably more shorts at that point. Our stop is a weekly close above the 50W/descending trendline connecting the tops from aug 2008 and Feb 09 (Somewhere near 49). We know it is a bit far. But if & when GILD closes below 44, we will feel better since it would set up a patten of lower lows. Our target is the atleast the october low of 36.

Apr 15th

Recap

Whipsaw wednesday on the eve of options ex. The ascending triangle/wedge in the SPX is still not broken. Volume was lighter than yesterday. The hourly chart shows that the 50 MA (hourly) and the 20MA (hourly) are trending sideways very closely, and the market kept bouncing between these two averages.

Trades

We started a small short position in GILD this morning @44.6.

We still have some portion (20%) of the SPY short position from yesterday. It is now slightly underwater. But we will let it be, since we are still net positive on our SPY short which we put on yesterday. We may get another push, but the downside is close. We know we have been waiting for it all this week. But cycles are imperfect like any other indicator. But remember the price has gone nowhere essentially since topping out since the 9th. We still favor a nice downside correction soon.

We will post what we think is the elliott labelling and a chart on GILD soon.

Midday Apr 14

10:30 a.m Too busy yesterday to trade or post. For today, we covered a portion of the precious metal shorts. A short term bounce has materialized in the precious metals as expected. We also covered our SDS short from friday AH today for a small 2% profit. We waited to see if 20Hour MA would give way. Instead it gave us a long tailed candle. We need to see a reaffirmation" of a sell signal on the 10 min to reload shorts. But we still think we are quite close timewise to a nice 10% or more correction.

12:00 Noon: Waiting for 20H to break with confirmation and bear flags to short.

12:30 Shorted heavily at break of 20H, covered some at SPY 840. Letting the rest ride. Looks like all the bears were waiting for that break too. The down move was swift, surgical and massive volumewise. We expect more downside. The target remains the 760 region which we have long touted.

1:30 Seeing an anaemic updraft. Looks like another shorting opportunity. The entry point would be to watch the 5 (10m) moving average cross under the 20 (10m) moving average. That would lead to a strong downdraft. Until then we shall wait.

1:40 The market is forming a bear flag on the 50 MA (30m). Exactly where we covered a portion of our leveraged short ETF. We may be setting for another downleg as soon as this 50MA on the 30 m breaks. 

2:15 P.M Superb little market tutorial in progress here. We are quite sure a lot of amateurs would have shorted when the market hit the descending 20MA(5 min). The market then headfaked a small down move and then if & when the price cuts above the 20MA(5min) one can expect a surge of green. We ideally want the 5MA (5min) to make a bear CROSSING of the 20MA(5 min). If you had shorted, you would be shorting into a double bottom. Trading is a lot about of patience and knowing when not to trade.

2:30 As noted, follow through on a classic intra day double bottom. Strong rally is ensuing. 200MA (5 min) ~85 SPY is the first region of resistance. We will wait for crossover mechanism to guarantee a shorting opportunity. Until then we wait.

2:45 smells like short term consolidation for one more small intra day push up. Staying clear , waiting for a short.

2:53 If we get the bearish 5MA, 20MA (5min) crossover, we would short with a stop above the 20MA.

2:59 The crossover signal has not yet triggered, the bulls saved the line. So we stand aside watching for the moment. Lots of chop here, which further confirms that this is a counter trend minute wave. BTW, quite enjoying day trading today, it has been a long time since we day traded and tape watched. Love the chop, so many moving averages, so many trendlines. Timing and nimbleness is the key. 

3.01 classic bread n butter WV pattern, right at the bottom of a chart. All the 5 min moving averages have played as they should. Absolutely terrific technical action here. Remember our crossover mechanism never triggered and our stand to wait and observe is vindicated again.

3.20 Break out to the upside of 50MA(5 min) should see some more green volume.

3.25 Leaving for the day, had some decent profits in the afternoon on the SPY down move. Still hold 20% of the short position. We expect much lower prices over next week or so.

Precious metals update

We have been bearish on gold for sometime now, and our position and the trade has indeed been vindicated.

As shown above the price has "landed" on the 200d moving average. Furthermore, gold has broken an important trendline of 5 months. Clearly, the market thought highly of this line to keep using this as support. Usually, prices will retest the underside of this line. The daily stochs are bottoming. All this translates to is that gold may see a bounce starting next few for a week or two. It could upto 900 or so. So we may look to cover some of our position on any strength and maybe reload higher in the next few weeks. We still think gold has much lower to go.

Offtopic

Feel free to ignore:

These videos are really nice. Very educational and refreshing.

Light bulbs went off inside, at times.

http://www.youtube.com/user/misesmedia

Midday update Apr 9-09

11.15 a.m Looks like the spike we had been expecting finally arrived. But we already bailed out on our long calls a couple of days ago, Bah!! so much for knowing about cycles etc. Most of the game is execution, patience and discipline rather than clairvoyance. More importantly, this turn date is looking like a cycle high => cycle low into Apr 24th turndate. Added a small short index short ETF position here. Stop is HOD.

6:00 AH Looks like we got stopped out @ 3.00 or so for a small loss. But I loaded small amount of SDS AH.

pithy update

Too busy today, so a barebones update

Stance: We may have hit a high into our turndate this week, next cycle turn is 23rd (+/-).

As for elliott waves, as we mentioned earlier this looks more and more like an expanded flat for wave B. We could very well see SPX 760 or lower by April 23rd. Things are quite unclear (atleast to us :-() in the next 2-3 days given what looks like a light volume consolidation.

Trades: Stopped out of the remaining 25% of our SPY calls for a small loss, but overall the long call trade was profitable. Nibbled at TBT in accordance with our post yesterday.

Is the 60 yr cycle ending?

Recap & Stance:

Light volume struggle day and the EW counts are all over the place. So lets keep it simple, if we take out today's lows we are going down. To be bullish, we need to take out today's highs. This weeks encompasses our topping date, so we will be a wee bit more careful

Trades:

Short ABX as noted yesterday. It looks like the precious metals are in wave 3 of some sort as discussed.

Still holding SPY calls. Will let go if today's lows are taken out.

Potential trades:

Above is a chart of TBT which tracks the inverse of the long T bond. Bonds have been in a bull market since 1981 (almost 30 years). As far as cycles, I believe the bond market has a 60 yr cycle trough to trough. Rates are at historic lows. Could this have been the bottom?

We don't know. 

What we have though is a "safe-ish" long picture. The stop is below the parallel channel. For the more conservative, it would be better to wait for a break above this channel.

According to our count now, we have seen waves (i) or (a) and have been in a lengthy consolidation phase, accounting for wave (ii) or (b). We are betting on a wave (iii) or wave (c) which should take TBT atleast to 55 or so.

Gold miner shorts

In keeping in lieu of our gold bear position, we are looking to go short some gold miners.

Above is a chart of ABX,. Quite a few of the miners have a similar picture. 

According to our labelling, ABX is in a 'C' wave which should take ABX below $17 over the next few months. The top in feb looks like a 'B' wave. Since then ABX has fallen in 5 waves and risen in 3, clearly showing a pattern of lower highs. We fully believe the lower low will ensure.

The more compelling evidence to short ABX is the "alignment of the stars" as we call it, is about to occur i.e 50d > 20d> 5d and all three with negative slopes. In elliot terms this means the 3rd of 3rd in the C wave is about to commence. We believe ABX will see a very sharp drop in the next few weeks.

We should have shorted this earlier, but did not find time to scan charts the past couple of weeks.

Our trade is to short ABX first thing monday morning. The stop loss is a close above 34$. It is a bit far away but we shall risk 10% on this trade, as we believe ABX will eventually come down below 17$ in the coming weeks and months and the reasons are quite compelling (atleast to us).

Mid day update Apr 3

11:45 Thus far as expected, looks like consolidation. Volume is light. Still holding onto 25% position in SPY calls from yesterday for a last gasp up move on monday.

5:45 Letting SPY calls ride into monday. No trades today, too busy in the afternoon. No change in the picture painted from yesterday.
We said we expected a struggle and that is exactly what we got, neither side won (OK - maybe the bulls drew some more bear blood). It feels like an "upward" consolidation before a final gasp push on monday. We are not happy with the odds of this happening, but we'll let the calls ride anyway as this can do our portfolio no harm, since we are already in the green on this trade.

Precious metals continue to sink. What we are watching for in this space over the next few weeks is to see a short term "alignment of the stars" i.e. 5d < 20d < 50d < 200d moving averages and all of them with a negative slope. As of now, there is only partial alignment in silver & gold: 200d( pointing upwards in gold), 50d(pointing upwards in silver). Next week is a quite key, as it encompasses a potential cycle turn date.

Getting overextended

Recap & Stance: Another whiff of bullishness. This only shows there are a lot of shorts caught out there, especially when the market turned at 666. We at right at the confluence of the blue and green trendlines above. 

Today looked like a small 3rd wave of some sort. We still like to think this was all within the context of a 'b' wave and what we have going on in terms of labels is an expanded flat, which means in the next week into our cycle date, we may top out and hit the purple line from the top, which should be a buying opportunity. 

We may have a struggle of a day (or slightly down) tomorrow (friday) before a last gasp up day on monday. We should ideally top out sometime on monday, according to the above scenario.

We also have some healthy negative divergences in the price action to stochastics. So a down move is coming soon. The encouraging thing to note is this rally has done something which the market has not since June 2008, push its head over the 20W moving average. If & when, the 5WMA exceeds the 20WMA, we should see another take off, this would probably be the trigger for a weekly long position.

Trades:

We made a scalp long trade today (SPY @84 calls), in around SPY 83 and were stopped out at 84, for an "alright" profit. We still have about 25% of our position on, in the lieu of the scenario described above.

Addendum:

We may look to add some SDS if we get near 847 or if we break 823 decisively. We still think 760 on the SPX is doable in the coming weeks.

Mid day Apr 2 update

As noted earlier, any sign of strength above 823 we are a buyer, we bought today around 830, calls on SPY 84, letting them ride on with a trailing stop.

Addendum:
1. What the SPY accomplished today is to sneak its head over 833, the 20week MA and this is the first time since Jun last year. If and when we get a weekly trend confirmation (i.e. 5 Weekly MA > 20 Weekly MA), we could actually see a run upto the 200d or even the 50 Weekly MA (currently around 1100), could well be the summer of joy.

2. Stopped out at SPY 840 today.

upside surprise

Recap & stance:

We got some unexpected strength. However, under the covers the message is quite mixed. 

For e.g. the volume on NYSE, transports etc. were lesser than those on the SPY. Usually one would expect $RUT to outperform on such a solid looking day, but it was one of the laggards. 

We are "scared" short term bearish into Apr 8th(+/-)

Trades:

No trades today too. We have been absolutely buried in work that there was no time to even look at the bourses during the day.

Lets keep it simple and forget waves and such, our strategy to wait for a close above 823 on increasing volume. We will add a small portion to the long side with a stop underneath. Lets see what the market does in the next key 7 days.