Dubai and a correction

As noted in earlier posts, we have cycle date around the Dec 5. The Dubai event seems to be the perfect excuse. We are looking for another push up in crude and consequently in stocks.

We continue to like MOS, YGE and some oil related names for another push up.

We will be wrong if the DOW break 10100 and trades around there for an extended period of time (1-2 days).

Nov 23

10 a.m. Another attack back up at new recovery highs, for us it is still more of the same. Take 10% profits in MOS(on half position). Let the rest run. If USO can break above the flag we can have hit 1140-1150 on the SPX

Nov 19

10:30 a.m Closed GNK @ 27. Still holding YGE. As of now appears to us like a correction. Next cycle turn is in the first week of December. Expecting to see some sort of a struggling correction into that timeframe. Our call for higher prices comes from the action in crude. Crude looks to be forming a bull flag, We would be a buyer of USO around 37.5 looking for 42-45 into Jan 2010. So we patiently wait. As we maintained before we believe the solars will soar during this last run in crude. We will watch patiently for now.

We are buyers if the SPX gets to 1080 for a quick long trade.

Trades Nov 16th

10:50 a.m. Lock 40% profit in GNK. Move the money to YGE for now. Need to research the solar stocks, they have not had any comparable rallies, we could be on the brink of one.

11:40 a.m. By 40% (on GNK) we meant on 40% of the principal, profit is about 15% give or take. 1120 here we come, we believe the market usually goes a tad higher than the 50% retrace (at 1120). 1125-1140 will be fair game. Let just use Dow jones 10500.

3:00 P.M What next for the market? -- Our forecast for the next few weeks is as follows:-

We break this run either today/tomorrow (Nov 17th would be ideal). The difficult part is from what level. Lets say +/- 2% from 1120. We fall into the 1075 range by Dec 5-10th. We have another cycle turn date during that period, probably leading to another rally from that period into Jan 2010 good for 100 SPX points or so (1150-1170). We think the solar stocks could really soar during this late phase of the rally.

Longer Term

This is a follow up to the post below.

http://maybeitsclarke.blogspot.com/2009/03/likely-targetscenario.html

The above is a longer chart of the industrial average. It is a fairly obvious formation and overtly bearish one if it comes to fruition.

So what is missing? - Time component. We need to have a whipsaws for a few months creating confusion for say 5-6 months. Let say if we attain 10800-11500 by Jun 2010 if will look perfect with a sort of rounded top formation that we have been calling for. More importantly, it will also tire out the PIII gang of elliott wavers and subside the bearish sentiment somewhat. We are waiting for the "ideal" cover declaring things are dandy, the latest TIME cover is far from it.

Price wise, we are entering into turbulence zone now. We expect numerous attempts to get into the 11000 area and lot of failures, frustrating both bulls and bears.

Lots of cycles would line up with a top in March-July 2010 and we could have then have a significant bear market in the last half of 2010-2011 time frame.

Ofcourse, like all things this is a long term view and something to keep at the back of your mind.

A Thought

Finally we found some time today to browse the trading blogosphere.

The first thing which jumped out as us was how blogs have elliott wave labels now. We distinctly remember how few wavers there were May/March 08.

Even tiny, individual stocks are being labelled by elliott waves. If you believe (like we do) that the market is in the end a giant arbitrage game the more the number of elliott wavers the lesser its effectiveness. No wonder (we and) many elliott wavers have been calling tops for some time, changing labels on every turn and getting burnt.

As for Prechter(whom we very highly respect), his EWI subscriber strength could be the only asset in hyperinflation now. Maybe EWI should use the graph of their subscriber strength as a market turning point.

With so many elliott wavers expecting PIII will it show up?

Nov 11 update

We will be liquidating SPY long positions accumulated as of our last posting on Nov 2.

Not many would have thought a new high was possible then, but we believed and we got one. We could still run up more. But since we can count an intraday 5 up in the UUP today, we are a bit cautious to see if this is the real deal.

Market has run up nicely bang into our turndate (+/-) here too, we can atleast expect some turbulence into the 50% fib retrace at 1120, if it even gets there. For now, we will liquidate positions and wait. The question to ask is are enough trapped that they have to sell? Lets watch at this juncture.

For long positions, we like the shipping sector. Looks like GNK is about to bust out of its 6 month triangle. GNK seems to have the highest short ratio so a more violent move should ensue. Today seems to be the kickoff. Lets put a tentative target of 30 on GNK for now. Other shippers should follow.

Similarly, MOS also seems to be coiling around in a triangle.

Cycle inversions

Just a quick note:-

We have had a 80 pt drop. We also mentioned the key turn date around Nov 10th (watch out for inversions into this date). We are oversold, but ideally we would like to see some more days of this selling continue. We believe another rally will brew from these levels (1018 - 1025?) and a secondary test of that low could be on Nov 10th.

The advance decline lines are showing a bullish higher lows setup.

If the market trades for a period of time below 1008, we will abandon the forecast above.

As of this point, we don't like the P3 elliott wave stance just yet. We think 1120 on the SPX is doable, probably even 1150. It would be very good for the bearish P3 case if this move was a slow arduous grind up into the mid 1100s by say Feb 2010, forming a sort of rounded top.