Aug 28

Aug 28 Our cycle date windows begins today. INTC made a new high as expected. The setup for the hook is in place.

9:45 a.m. We will be travelling on some work related issues for a couple of weeks. The Put call ratio is 0.64. We can do with some decline. We added some SPY short positions.

12.30 P.M

We will be off in the afternoon and be out for a couple of weeks or so.

A recap our stance:-

Nice decline (at least nicer than the past few declines). More so, it comes bang in on our cycle highs. We showed you a big 34 week cycle coming in UTX (and also the DOW) around first week of sept1. In our cycle model, today was the top of the may 13th (low) cycle. Usually when multiple cycles, elliott wave labels match up we expect see a sharp decline. We will give this decline upto 15th Sep. We must break back below the 1000 and very preferably at least visit last swing low 980 by then.

Accordingly, our PF has various kinds of put and short positions on SPY, FXI, QQQQ, UTX. We also have long positions which are essentially house money in dividend paying stocks like INTC. We usually take profits in stocks.

Now, if we don't see a decline by then - it gives an important signal that the market is rallying even on bearish cycles. We must respect that. Since then, the market can rally into november and even Mar-May 2010 possibly.

Our preferred scenario is however by our cycle work a decline into oct-november. Followed by another advance into July 2010. Fundamentally, we think a second stimulus will be passed by the government or atleast some of the spending of the first one will be brought forward in time.

See you folks in a couple of weeks.

We will off in the afternoon and be out for a couple of weeks.

Aug 27th

10:10 a.m Much better Put call ratio today (for the bears - 0.84). We don't think 1016 will give way here.

10:30 a.m We are going to act so - If the market dips below 1016 (briefly) and then back up, it will be a shakeout of weak longs and would propel the markets to the 1040 region. If we spend time below the 1016 region, say two hourly candles then we are going to correct more deeply.

If you have noticed the intra day action lately in the transition from correction to rally there is a very familiar pattern i.e. bounce into a support level, retrace back for a double bottom and a rally, followed by a triangle consolidation to a new high.

We think a rally is somewhere around the corner, as the put call ratio (PCR) creeps up above 1.

11.00 a.m Nat gas hit our $2.7 region.

Is there capitulation? - maybe.

Is it time to buy? - Not until we clear the 20W moving average. Given how compressed nat gas prices are, there should be plenty of room to run if we close above the 20W.

12.00 P.M And the pattern strikes again. Unfortunately we missed the pop in our lottery long BPOP.

12.15 Lottery CIT exploded and with us this time :-)

1.00 P.M Out of CIT for 4%, not bad for 1 hour. On another note, watch GS intraday chart.

Does the pattern remind you of some other chart?

- Doesn't it resemble the SPY chart since the march bottom? If it holds true, we should

a failed HnS and a thrust up. Sweet fractal if it comes to fruition.

5.00 P.M Big move coming soon - four tight range days. No prize for guessing it should be to the upside. Another of our lottery long PRKR exploded. We believe there is lots more upside to this one. It has a 17% short interest as of last record. If that still holds, we could easily see a 50% move in 1 week. That being said, the "quality" of lottery longs has been going down for a week now. We can find very few unexploded ones with the RIGHT setup. Ofcourse, we will post here if we find any. We are curious to know if you did manage to catch any of these.

Cycle wise, tomorrow onwards, we are also into a big cluster of cycle dates from 28(+/-) until Sep-mid. Lets see if our cycle model holds up. Meanwhile the advance-decline line continues to make lower highs in the face of the advance.

Aug 26

10:30 a.m We are not going to fall if the Put call ratio is this bearish

10:50 a.m Volume is looking good today. Most trend reversals are presaged by a volume expansion. Ideal for the bearish case would be a big volume day and a small price movement.

12:30 a.m. The put call ratio is at ~1.15. Quite a few expecting a correction. Look at INTC, looks like it has recharged its energy.

2:30 P.M The strength in INTC is telling. We believe a breakout to a new recovery high is in the cards for this name over the next week or so.

2:50 P.M INTC looks destined to break its long term resistance line from the Oct 2007 highs - the bear market trendline. Meanwhile the put call ratio is still hovering around 1.1. This is not forebode well for the bears.

4.06 P.M Another day, another green candle. The put-call ratio is at 1.04. $CPCI closed at 1.9.

Today smells, feels, looks like consolidation. There is a big move coming one way or another in the next couple of days. As of now, we are guessing to the upside, following INTC's lead. Look at SMH, these are the leaders of the NASDAQ. SMH's formation doesn't look like a top.

• The upside hook is missing.
• The indicative high volume day is missing.
• No long tails above either -- look at the the previous Aug 7th top.

The weekly chart of GS looks like a bull flag for another blast up into the 175 area.

Can a bubble form in stocks again?

While we maybe thinking far in advance, if the markets don't turn by september 7th or so, we have an intermediate high turn date on november - meaning markets could rally all the way into that turn date, it could be a rise similar to the one in the shanghai index. So we give the market some time to turn down by mid september, we would have an inversion in my cycle model and then higher prices into our november turn.

Fundamentally, considering the FED's liquidity pumping scheme a bubble is not far fetched.

Additions to the Lottery List

Some more additions to the lottery list

1. CPF (target - 6)

2. BPOP(target - 3)

3. MTXX (target -??)

4. HNBC(target - 8)

5. HW(target - 4.2)

6. KNDL(target 16.5)

Another one to watch is HMY (symm triangle) -- which way is it going to break??

We would like to add, most of these are fundamentally trashy stocks. So one needs to time their entry and exits precisely. For this we use a simple trend following technique of a 5MA x 20MA crossover on a timescale of one's preference. The exit strategy is a close below the 5MA. Since these are so explosive a 15m timescale usually suffices to capture a decent 5-10% move.

Additions to lottery longs

Since our lotteries have recently exploded, we looked for some more and listed below are additions to that list.

1. DPTR(target $3)

2. HTE (target $6.5, bull flag)

3. PURE ( target $2.25)

4. OSIR (target $15.5)

Aug 24

10:10 a.m Dumped all KEY at 6.93. Picked up some PACR @4.05.

10:30 a.m Whoa! PACR. Sold 30% at 4.4

10:50 a.m PACR seems to be forming another triangle. Will add more on breakout. Our target is 5.21 eventually.

11.00 a.m Hmm Another lottery from the list below, DRL exploded. Unfortunately without us :-(

11.05 a.m And so did CT, hello, don't leave us behind!!! Stopped out of PACR at 4.3, Cannot complain with 7% in 1 hour. If it breaks 4.5 we will ride again.

11.10 a.m Stalking unexploded ones like IBNK. We may have to leave now for a meeting. We will be back in the afternoon. If you see explosive lottery longs do share :-)

12:50 P.M Short UTX@59.59

4:30 P.M Natural gas made it into our general target area of 2.7 (We believe the low was somewhere around 2.85). That puts our bias into neutral. Trading above 3.7 or so, should be the first signs that a multi month rally in natural gas is under way. Natural gas could even triple under such a sustained advance. This is not a call to buy but a call to watch. If the recent low breaks, 2.7 looms.