2011 Updates


12/16
As long as the market trades below the October high, a wave 2 from the November low can't be ruled out, which may completed over a week ago. Any move above trendline resistance would indicate some strength coming and the wave c alternate count would get more attention at that point.

The NYSE Summation Index is in a downtrend at this point. But daily Cycle10 is bottoming out and 2-RSI is pushing higher from oversold levels. So at least a test of trendline resistance (567 area) is not out of the question next week.

A look at the weekly chart shows that the odds are greater that the market is heading lower (after a brief test of trendline resistance?) as the Close came near the Low for the week and Cycle10 is still in a downside pressure phase, with more room left before getting oversold, mid term. A break of the previous week's low would be a stronger signal there is more to come to the downside.

The weekly closing prices chart seems to be helpful in locating likely future turning points, using trendlines drawn through the peaks and bottoms of these closing prices. Now its heading lower, after once again failing to break through trendline resistance. The same goes for the RSI 25 indicator.

Another technical sign which doesn't bode well for the stock market but could be good for the USD, was GLD's (Gold etf) breakout from a several years long standing bullish price channel this week. With the tide apparently changing in this market, chances are that other markets like i.e. Stocks, Oil, Commodities, Real Estate will experience pressure too, since these markets tend to move more or less in tandem.

The 20Y T-Bond etf TLT weekly is going for its third test of trendline resistance next week. It has oscillated higher within two converging trendlines and since its getting close to the Apex, a breakout should occur soon. I.e. a downside breakout would indicate higher yields ahead.

The Neural Net system is still Long on the OEX weekly and turned Short on GLD (Gold etf) and Short on SLV (Silver etf) after this trading week.

Below is also a S&P 500 Neural Net Forecast for the next trading week, chart courtesy of chartsedge.com
Please, be aware that inversions can occur in these NN forecasts, like in the Bradley indicator. It should be used with other indicators.

The Market Outlook 2012 Report should be out in January.

Best Wishes for the Christmas holidays!

12/02
U.S. Unemployment unexpectedly fell to 8.6% in November and nonfarm payroll employment rose by 120,000, a positive surprise for the economy.

The stock market soared this week but the underlying technicals were weak, with poor breadth and lack of Volume power. I.e. the NYSE Summation Index even held on to its bearish mode and McClellan 21 EMA only showed a small reaction up, despite the strong price advance. So i suspect a lot of short covering was going on in the market.

This roughly 45 points move in the OEX for the week, resulted in 2-RSI entering its overbought zone and a test of minor trendline resistance in the OEX. Friday's trading session formed a reversal candlestick up against this resistance, so these factors suggest a pull-back starting early next week.

From a Dynamic Gann Level point of view, the peak for the week came up against the blue L3 DGL which also caused several pull-backs in October and November.

A look at Murrey Math shows the OEX was not able to close above the strong 4/8th MML after several attempts at the end of the week.

Using the Elliott Wave Principle its possible that a full five wave Impulse structure from the October high, already ended at this week's low. So as long as that high stays intact, a corrective phase developing as part of an overall bearish trend, still can't be ruled out, a stance which is supported by weak technical factors.

A look at the OEX Weekly chart shows that the downside cycle pressure phase in Cycle10 is still barely intact after this trading week. So since the countertrend advance has reached the weekly trendline resistance area, the overall bearish trend could resume soon.

However, any weekly close above trendline resistance and the October high, would prove me wrong about the ended Intermediate degree wave (2) scenario from the October low and probably lead to a delay of this wave (2) top.

With another trading month just ended, all the monthly charts have been updated. I.e. the OEX Monthly still reflect a long term bearish mode. The close for the month came up against trendline resistance.

The 20Y T-Bond etf TLT weekly experienced some selling pressure this week but recovered a bit and was able to close at trendline support. Any weekly close below this support, could lead to more weakness. Any move beyond the Doji high, on the other hand, would signal another test of trendline resistance.

The Neural Net system turned Long on the OEX weekly and is still Long on GLD (Gold etf) and Long on SLV (Silver etf) after this trading week.

Below is also a S&P 500 Neural Net Forecast for the next trading week, chart courtesy of chartsedge.com
Please, be aware that inversions can occur in these NN forecasts, like in the Bradley indicator. It should be used with other indicators.

11/25
Most likely a minor wave iii forced prices lower this week, which has pushed i.e. Put/Call Ratio readings into oversold territory (above 1.20) short term. But this first leg down from the October high as part of what could be an Intermediate degree wave (3) underway, is not ending before a full five wave structure can be counted from that high. So the wave iv and v remains.

Since the key Fib. support was reached Friday and the very near term 2-RSI is at an oversold extreme, a reaction up is not ruled out early next week.

In Murrey Math theory, the (yellow) 7/8th MML is viewed as weak support/resistance, so if it holds, reversals from these MMLs can be sharp in nature. In this case, if it fails to hold, then the next likely target for this wave iii could be the strong 8/8th MML at 500. The next positive Stochastic crossover would increase the odds of a short term bottom in place. Whether this will occur from the 7/8th or 8/8th MML support zone, the next trading week will probably tell.

A look at the OEX Weekly chart shows a firm downside cycle pressure phase in Cycle10, which has yet to reach "oversold" territory, mid term. This and the OEX close at the low for the week, suggest more selling pressure coming, possibly after a brief upside market breather for a day or two.

Not unexpected, the market weakness this week pushed the buck higher and even closed above trendline resistance Friday. But it would take another up close to have a clear breakout. If so, it would open up for even more strength in the Dollar.

The 20Y T-Bond etf TLT weekly made another test of the larger trendline this week and formed a reversal candlestick up against this resistance. So this could mean the Bond market is heading lower in the coming week(s). Any weekly close below trendline support, would indicate more weakness thereafter.

The Neural Net system turned Short on the OEX weekly but is still Long on GLD (Gold etf) and Long on SLV (Silver etf) after this trading week.

Below is also a S&P 500 Neural Net Forecast for the next trading week, chart courtesy of chartsedge.com
Please, be aware that inversions can occur in these NN forecasts, like in the Bradley indicator. It should be used with other indicators.

11/18
The OEX broke out from the earlier mentioned Inside Week to the downside, which resulted in a bearish reversal in the NYSE Summation Index trend. The OEX close near the low for the week, suggest more to come to the downside next week, signaled by a break of the low.

A look at the S&P 500 60 Minute Chart shows the market moves impulsively to the downside after a series of wave two's, which gives support to an ended wave (2) of Intermediate degree, at the October high. A weekly Stochastic crossover after this trading week, also increases the odds of a wave (2) peak already in place.

At the end of the week, the OEX found support on the earlier tested L2 DGL with the very near term related 2-RSI at the same time entering its oversold territory. From a Murrey Math point of view, this is the 3/8th MML support area. So a reaction to the upside is not ruled out early next week, before likely continuing on the overall bearish path lower.

The 20Y T-Bond etf TLT weekly broke out from the Inside Week to the upside and closed above trendline resistance and near the high for the week. So because of this, another test of the larger trendline is not out of the question, within a week or two.

The Neural Net system is still Long on the OEX weekly and Long on GLD (Gold etf) and Long on SLV (Silver etf) after this trading week. Updated SLV NN chart

Below is also a S&P 500 Neural Net Forecast for the next trading week, chart courtesy of chartsedge.com
Please, be aware that inversions can occur in these NN forecasts, like in the Bradley indicator. It should be used with other indicators.

11/11
This choppy trading week produced another example of how useful the NYSE Summation Index can be in figuring out the true trend, as despite the pullbacks seen in the past few weeks, it has yet to break its 3 EMA.

So since the overall trend from the October low is still positive at this point and the OEX has entered the +/- 1 day time window of the 11/11 Gann Angle and the market is likely in a series of wave ii's, a reversal in the opposite direction is looked for, early next week.

Any positive breakout (daily closing basis) Monday, from the Triangle pattern formed in the OEX, could lead to a test of the October high but wouldn't necessarily cancel this GA view, as if this move occurs within the next few trading days, it would still be roughly within the time window of the indicated bearish reversal.

If the Triangle remains intact, the odds of the wave ii scenario would increase. This could come as an intra-day breakout from it but close inside the Triangle again, forming a bearish reversal bar.

But who knows, the Berlusconi resignation could bring some temporary positive mood to the market and drive prices even higher and keep the trend alive longer than expected. But it could come on underlying technical weakness, as so far the recent advance is not backed up by i.e. McClellan's 21 EMA breadth and Volume.

One way to deal with this foggy market situation is to take advantage of the Inside Week pattern observed after this trading week, as seen on the weekly chart. Inside Weeks or Days reflect market indecision and a breakout from this indecision is determined by a break of either the High or Low of the previous week, to get a clue as to where the market is heading.

So a positive breakout would probably lead to a test of the earlier mentioned stiff trendline resistance area, before looking for an Intermediate degree wave (2) top. Any negative breakout, on the other hand, would increase the chances of the wave (2) top already in place, at the October high.

An Inside Week is also observed in the 20Y T-Bond etf TLT weekly. So the same strategy is used here, to try find out where this Bond market is going.

The USD Daily is in a short term uptrend, which probably will continue if the stock market makes a bearish reversal next week. Trendline resistance is up around 79.6.

The Neural Net system is still Long on the OEX weekly and Long on GLD (Gold etf) and turned Long on SLV (Silver etf) after this trading week. Updated SLV NN chart

Below is also a S&P 500 Neural Net Forecast for the next trading week, chart courtesy of chartsedge.com
Please, be aware that inversions can occur in these NN forecasts, like in the Bradley indicator. It should be used with other indicators.

11/04
The OEX fell back for support early in the trading week, after showing an overbought 2-RSI reading at the end of the previous week. The minor (blue) L2 DGL (Dynamic Gann Level) apparently was strong enough to cause a reversal, a move which stopped when it met the L3 resistance.

If the overall positive trend from the Oct. low seems intact when prices are entering the time window (+/- 1 day) of the upcoming 11/11 Gann Angle cycle convergence, it could mark a peak in the market.

On the other hand, if prices are clearly falling into this GA, it could instead indicate a positive reversal coming. The key is to observe the directional trend going into these GAs and look for a reversal in the opposite direction, when the time window is reached.

This GA marks 90 Trading Days from the July high and 135 TD from the larger May high, so it's a fairly strong GA which could have an impact on the market.

2 new contracting trendlines have been formed in the VIX (Volatility) so higher volatility is looked for, in case trendline support is reached next week and holds on a daily closing basis. Vice versa for trendline resistance.

A look at the weekly chart shows a Cycle10 bearish reversal. So who knows, the market may have already peaked before reaching the weekly trendline resistance, mentioned in the previous update. Or it may go for one more push towards this resistance area, into the earlier discussed 11/11 GA. Only time can tell for sure what will happen. A break of this week's OEX low will increase the odds further that Cycle10 has started a new downside pressure phase, mid term.

The monthly charts have been updated, most showing a snap-back move towards earlier broken trendlines. This pattern is often seen before the new trend (in this case bearish) resumes. Any clear monthly close above these trendlines and the May high, will negate the current Primary wave 3 scenario and lead to further delay of the wave 2 top. MACD is still holding on to it's long term bearish mode, despite of October's roughly 100 points advance in the OEX.

The 20Y T-Bond etf TLT weekly is reacting up from first Fib. support but 25-RSI has yet to climb into overbought territory.

The Neural Net system is still Long on the OEX weekly and Long on GLD (Gold etf) and Short on SLV (Silver etf) after this trading week. Updated SLV NN chart

Below is also a S&P 500 Neural Net Forecast for the next trading week, chart courtesy of chartsedge.com
Please, be aware that inversions can occur in these NN forecasts, like in the Bradley indicator. It should be used with other indicators.

10/28
The market made a brief retreat after Monday's trading session, when it ran into the L3 DGL resistance and 2-RSI reached an overbought condition.

After the dip, the market blew sharply through this key DGL and 2-RSI once again became overbought as a result. But this move to new highs was not backed up by New High - New Low Index readings, tracing out a minor bearish divergence. So this advance is loosing steam it seems.

Because of the magnitude of the advance from the October low, it is possible that the mid October consolidation in fact was the wave b (Flat) part of an a-b-c structured wave (2) of Intermediate degree.

The NYSE Summation Index & 3 EMA continues to show a clear uptrend. However, a look at the OEX weekly chart shows there is not much upside potential left, in case the trendline convergence resistance turns out to be strong enough to cause a mid term reversal.

This view is supported by the weekly Cycle10 now at levels where it normally would make a bearish reversal. In addition, daily 25-RSI is about to enter its overbought territory and Bullish Percent sentiment is close to strong trendline resistance.

So if this really is a wave (2) coming to an end soon, this stiff weekly trendline convergence resistance area (590 - 600) could be an exellent point to Short the market for the mid & long term (i.e. Bear etfs.) This area is also where a larger L3 DGL (Dynamic Gann Level) comes in.

So it could be a good Risk/Revard trade setting up soon, where a quick exit is possible by any clear weekly close above both the trendlines or the April high, which would negate this wave wave (2) scenario. A wave two can't retrace more than 100% of wave one, to remain a valid count, according to the Elliott Wave Principle.

The Reward part can be many times more the Risk part, given the mid term overbought position of the market and the Elliott Wave setup, with the upcoming Intermediate degree wave (3) likely being the sharpest one of this five wave pattern, if this Primary wave 3 Impulse underway from the April high turns out to be a correct wave count.

The VIX (Volatility) broke out sharply to the downside from the 2 contracting trendlines discussed in the previous update but 25-RSI is soon getting "oversold" as a result, which would flash a warning sign about higher investor fear ahead and with it, pressure on the stock market.

The 20Y T-Bond etf TLT weekly reached the first Fib. support level this week, which caused the low for the trading week. Any weekly close below it, would indicate more weakness ahead, towards the 50% retracement level.

The Neural Net system is still Long on the OEX weekly and Long on GLD (Gold etf) but turned Short on SLV (Silver etf) after this trading week. Updated SLV NN chart

10/21
The wave a or alternate c is pushing higher, now struggling with a minor trendline convergence resistance. It is also getting closer to the key L3 DGL mentioned in the previous update.

From a Murrey Math point of view, the OEX is roughly 5 points away from testing the 4/8th MML (Murrey Math Line) which is viewed as one of the strongest resistance/support levels in this method. Often near term tops/bottoms are forming at this MML.

Stochastic momentum is also flashing a warning sign, tracing out a bearish divergence versus the new high in prices. And given the current position of the very near term 2-RSI indicator, which is about to enter it's overbought territory, odds are good the market will make a retreat from the resistance area outlined above.

This week's up and down price oscillations within a tight range, gives a good example of how the NYSE Summation Index with the 3 EMA can help out showing the true trend, despite the price "noise" seen throughout the week.

The significant market advance from the early October low is soon causing an overbought extreme reading in the sentiment related Bullish Percent Index with stiff trendline resistance coming in around 90.

The VIX (Volatility) developement has formed 2 contracting trendlines, which should lead to a breakout (either upside or downside) before the Apex is reached. The directional breakout should give a clue as to where the market is heading thereafter.

The 20Y T-Bond etf TLT weekly weakness continued this week but has yet to reach the first Fib. support level. The bearish trend looks intact at this point.

The Neural Net system is still Long on the OEX weekly and Long on GLD (Gold etf) and Long on SLV (Silver etf) after this trading week.

10/14
This week's break above trendline resistance confirmed the end of a wave 5 (Diagonal Triangle) or b (alternate wave count) at the early October low. So a corrective wave (2) of Intermediate degree is probably underway to the upside, with the market currently working on the last stages of the first wave a part of a possible a-b-c three wave structure to the upside.

Wave two's in general often takes the form of simple zig-zag corrections, while wave four's tend to turn into complex triangles. A typical wave two would retrace 50% or 61.8% of wave one.

Friday's close came above the long standing L2 DGL (Dynamic Gann Level) resistance, with the horizon now cleared for a further advance towards the next L3 key resistance area. The markets wants to reach these key DGL's 60 - 70% of the time, before making a short term reversal. Friday's 2-RSI climb above 90, shows there is not much left on the upside, before a pullback is likely in the very near term. So i doubt the L3 zone (567 - 570 area) is overcome on the first attempt, (if the market decides to go for a test of it) before making a retreat next week.

I.e. the NYSE Summation Index is now in a firm uptrend, after it formed a bullish divergence earlier in October. By simply putting on a 3 day EMA (exponential moving average) on this index, the trader is able see the true trend more clearly, filtering out "price noise" and small wiggles in the indicator itself. When the 3 EMA is crossed, it's an alert of a possible trend change. And potential divergences forming in it, are also useful to watch, for finding stronger moves about to start.

Investor fear, as reflected by the daily VIX (Volatility) has collapsed in the last two weeks, with it's 25-RSI getting close to "oversold" levels as a result. So higher volatility (stock market weakness) is in the cards soon.

Gold and Silver (GLD & SLV etfs) have recovered in recent weeks. GLD is still trading within a long term bullish channel, while SLV seems to have already established a new bearish channel.

The 20Y T-Bond etf TLT weekly closed below minor trendline support this week, opening up for even more weakness towards first Fib. support (110 area). The 25-RSI just leaving it's overbought zone, shows there is plenty of room left on the downside, before reaching an oversold condition in this etf.

The Neural Net system is still Long on the OEX weekly and Long on GLD (Gold etf) and Long on SLV (Silver etf) after this trading week.

10/07
Because of this week's market dip below the August low, the price technical side for a valid wave 5 from the August high has been fulfilled. However, as the finer wave structure from that high looks a bit foggy at this point, the chances of an already completed wave 5 would increase with any clear break above trendline resistance (daily closing basis) next week.

An alternate wave view suggest a more complex wave 4 pattern is developing, as i admit the structure from the August high to Tuesday's low doesn't exactly look like a text book five wave impulse structure, which should be expected from a wave 5.

A near term bearish reversal from trendline resistance and a break below the recent low, would indicate the wave 5 has more unfinished business to the downside, leaving a series of 1-2s lower.

With the brief dip below the Aug. low, a check for possible bullish divergences developing in key momentum and breadth indicators, shows this to be a fact in i.e. 25-RSI and McClellan's 21 EMA making higher lows, compared to the stock market's lower low. Often stronger bull moves starts sooner or later, after observing such bullish divergences.

But it doesn't always occur. With this in mind, the New High - New Low Index one day only reading below its August low, gives mixed technical readings this time.

So in my view, a workable strategy on the Long side in this case, could be to wait for hard technical signals, like a break of trendline resistance and a re-test of it from above, for a possible trade setup.

On the Short side, since the very near term related 2-RSI has already made a bearish reversal from mildly overbought levels, a break below Friday's low, would signal more to come to the downside, in the next few days thereafter. At a minimum, a close below the 5 EMA is a probability.

The VIX (Volatility) currently resting at trendline support, reflects a pivot point in the market, either a reversal (stock market weakness) or a breakthrough (even higher prices) is the next market event looked for.

The 20Y T-Bond etf TLT weekly pulled back this week, as mentioned it could in the previous update. Given the overbought 25-RSI, any weekly close below minor trendline support, could open up for even more weakness in the weeks thereafter.

The Neural Net system turned Long on the OEX weekly and is still Long on GLD (Gold etf). It also turned Long on SLV (Silver etf) after this trading week.

09/30
Not much has happened since the 09/23 STU, the market is still working on a wave 5 Impulse from the August high, a pattern which turned into a series of 1-2s lower this week. The market is now possibly in the early stages of a wave iii lower. If this count is going to work out correctly, it should force prices below the August low, sooner or later.

At a minimum, a test of the August low is in the cards for the upcoming trading week. 2-RSI should have dipped below 10 by then, alerting of an upside breather coming thereafter. Overall, if the August low fails to hold, this wave 5 may go for a test of the L3 DGL (Dynamic Gann Level) support zone.

I'll bet a New High - New Low Index bullish divergence will be a fact, if a test of the August low is seen. It would give support to this last wave 5 scenario.

Put/Call Ratio readings continues to reflect an oversold market condition.

The VIX (Volatility) is pushing higher, overcoming trendline resistance this week. It backs up the above near term market view.

The 20Y T-Bond etf TLT weekly formed a Hammer candlestick this week, up against the major trendline resistance. This could mean a pullback coming next week.

The Neural Net system is still Short on the OEX weekly and turned Long on GLD (Gold etf). It is also still Short on SLV (Silver etf) after this trading week.

09/23
Once again, the L2 DGL (Dynamic Gann Level) resistance zone proved strong enough to force a near term reversal in the market. And with it, increasing the odds of the last wave 5 underway to the downside being a correct wave scenario, as the OEX is just a few points away from testing the August wave 3 low.

Only time can tell for sure if this wave 5 will take the form of a Double Bottom pattern or make a lower low, before reaching it's termination point. What's quite certain though, is that an upside corrective phase is next on the list of market events, if this is a wave 5 ending soon.

Friday's positive OEX reversal came as a result of an oversold 2-RSI, this could be a short breather for a day or two, before the near term bearish trend is likely resuming.

Anyway, the current development in i.e. the New High - New Low Index (possible bullish divergence forming) and Put/Call Ratio readings, (climbing into oversold territory) is in line with what should be expected from a wave 5 being close to a wave 3 low.

The same goes for daily Volume readings and RSI 25 behavior, possibly tracing out a bullish divergence here as well. This will be confirmed with any actual test of the August low in prices, while making a higher bottom in RSI 25 at that point.

As for an update on the VIX (Volatility), one can see that investor fear has exploded since summer but currently has yet to reach the high readings, experienced at the August low in the market.

The buck is gaining ground, after USD daily prices broke out from a Triangle pattern, roughly 3 weeks ago. The sharp advance has already fulfilled a 1:3 Risk/Reward ratio trade, if a Stop was placed right below the lower Triangle line. After a pullback likely starting soon, the USD should climb even higher thereafter, as the demand for the dollar could increase further in future.

Gold prices, here represented by the GLD weekly etf fell sharply this week. The high Volume readings at the recent peak, suggest a major top in place, which will be confirmed with any downside breakout from the bullish channel.

Silver also sold off strongly this week, with SLV nearly reaching the 50% retracement level, at the low for the week. Trendline and key Fib. support around 22.5 - 24, is a possible target zone for the coming weeks.

The 20Y T-Bond etf TLT weekly reached the major trendline target this week. Even with a RSI 25 now above the 70 level, no clear bearish divergence is observed though, so a re-test of the high sooner or later, could be in the cards. If RSI 25 is making a lower peak at that point, it would be stronger evidence of a more significant top forming in TLT.

The Neural Net system turned Short on the OEX weekly and is still Short on GLD (Gold etf). It is also still Short on SLV (Silver etf) after this trading week.

09/16
After 5 positive trading days in a row, the 2-RSI has climbed above 90, indicating a near term overbought condition in the market. This, at the same time as the OEX has reached the same L2 zone which caused the previous near term top. So a pullback could be the outcome early next week.

As for an update on the Elliott Wave situation, the OEX has probably been working on a wave ii Flat pattern, from the low made 2 weeks ago. This would be a valid wave count as long as the August high stays intact. If broken, a more complex a-b-c-d-e wave 4 Triangle could be developing, which should not overlap the wave 1 low. The wave ii scenario is part of the last wave 5 structure to the downside, which would complete a full five wave Impulse structure from the May high, the Intermediate degree wave (1).

The 20Y T-Bond etf TLT weekly is getting closer to the larger trendline, mentioned in the previous update. At this point, the sharp uptrend is viewed as intact, despite 2 weekly down closes in a row. Any weekly close below the minor trendline (black) could open up for some more weakness and could mean it has already formed a top up against the red trendline, which is drawn through closing highs instead of using the highs.

The Neural Net system is still Long on the OEX weekly and finally turned Short on GLD (Gold etf). It also turned Short on SLV (Silver etf) after this trading week.

09/02
The mid August decline (the supposed wave 5 possibility mentioned in the previous update) failed to reach the wave 3 low before reversing, forcing a revision on the wave count for the short term. Any wave five would normally reach the end points of wave three's at a minimum, excluding the rare truncated fifth scenarios.

So apparently the wave 4 turned into a more complex w-x-y pattern, which probably ended at the August high. From a DGL angle, that top came up against a L2 (50%) line, projected from March this year.

Back to the daily chart, any downside break of the minor trendline (daily closing basis) the OEX market is now resting at, would increase the odds of the last wave 5 underway from that high, which should lead to a test of the wave 3 low, sooner or later.

So if this wave count turns out correct, the minimum short term downside target could be the 500 area. From a Murrey Math point of view, that would be the strong 8/8th MML support zone. Since the 2-RSI is about to dip below 10, a brief market breather is not ruled out though early next week, before likely resuming the short term bearish trend.

But an eye is kept on the next Gann Angle cycle convergence, due 09/07 (+/- 1 day leeway), as any fast move and test of the August low, going into this GA time frame, could mean a wave 5 termination and a Double Bottom already in place at that time. Especially if RSI 25 is tracing out a bullish divergence at that point.

With another trading month just ended, a look at updated monthly charts i.e. shows an OEX MACD which seems to cross it's MA, which would be a conservative long term sell signal for this market. But if zooming in on the chart, it's in fact still a hair away from crossing it, keeping the bullish mode from July 2009 barely intact.

With Intermediate degree wave (2) about to launch to the upside (after the one degree lower wave 5 termination) we'll see what the September trading month will bring for this indicator. It depends on how long it will take to complete the wave (2) upside correction, as part of this Primary degree wave 3 Impulse structure from the May high.

Despite the doom and gloom stories found in the media, the USD daily is breaking out to the upside from a Triangle pattern, a positive sign for the buck. By keeping a Stop right below the lower Triangle line, this could be a trade with a good Risk/Reward ratio, in my opinion. But i'm personally not walking the talk on this one.

The 20Y T-Bond etf TLT weekly reached new highs this week. It closed near the high for the week, which often means even more upside action in the upcoming trading week. Only time can tell for sure but this etf may go for a test of a major trendline drawn through the important Fall 2009 & 2010 peaks, before a significant pull-back could be the next event to look for in this market.

Gold could go for a test of the major 8/8th MML around the $2000 level, before a long term top could be in place. A long term top soon, is also suggested by a major wave 5 structure from 2008 coming to an end.

Considering the resumption chance of deflationary pressure, i.e. Gold, Silver, Oil, Real Estate, Commodities and Credit markets should fall along with the stock market, long term. So i.e. cheaper food and gas prices could be some of the outputs. In the face of these bearish looking markets, the USD could in fact rise, because the demand for the buck could be higher in the future, as the result of people wanting to pay off debt, by selling all kinds of assets, to raise cash.

That's also why many asset prices could be cheaper in the future, because of increased supply. So a potential deflation can be positive for the consumer to some extent but not so good for companies and in turn employment, over the long term.

The Neural Net system turned Long on the OEX weekly and is still Long on GLD (Gold etf). It also turned Long on SLV (Silver etf) after this trading week.

All the best for the Labor Day holiday!

08/19
A wave 5 has forced prices lower in recent days and is soon reaching the early August low, a potential scenario mentioned in the previous update. A test of this low is likely, as Cycle10 is in the early stages of a downside pressure phase. After a completed wave 5, a three wave corrective phase starting to the upside is looked for. This could take the form of an Intermediate degree wave (2) as part of the Primary wave 3 structure, (one degree higher) supposed to be underway from the April high.

Bullish divergences in several indicators like the New High - New Low Index and the 21 MA McClellan breadth, gives support to the view that this is the last wave to the downside, which could terminate in a Double Bottom pattern scenario or at a slightlly lower low. 2-RSI is already fairly oversold (dipped below 10) so a Double Bottom is not ruled out.

Also, the Put/Call Ratio has climbed to an extreme level, indicating a bottom forming soon. The QQQ Weekly Stochastic is tracing out a clear bullish divergence as well.

An alternate wave count, suggest the wave 3 from the July high is about to be completed only, when it's current wave v has reached its termination point.

Anyway, both counts indicate a positive reversal ahead, the difference will be in the upside magnitude. If only the wave 3 is ending, then the wave 4 is not allowed to overlap the June wave 1 low, to remain a valid count. If an overlap occurs, chances are the Intermediate wave (2) is working it's way higher but it can't retrace more than 100% of wave (1), the April - August decline, to avoid negation.

If it's able to overcome the trendline resistance showed on the daily chart, then it could come close to the broken trendline on the OEX weekly chart which will now act as a stiff resistance area instead. Which is also an excellent point to go Short the market if reached, in my opinion. These two trendlines are high probability zones for the start of a more serious market sell-off, in Intermediate wave (3).

A look at the weekly 13 & 34 EMA trend chart shows a confirmed Bearish mode, so taking trades in this direction could be more favorable from now on. In under 2 weeks, the longer term monthly MACD will tell if it has turned bearish too.

An updated Murrey Math Long Term Chart shows a perfect hit to the major 4/8th MML, at the August low.

The 20Y T-Bond etf TLT weekly is soaring, the close near the week's high, indicate even higher prices next week, at least intra basis.

The Neural Net system is still Short on the OEX after this week and still Long on GLD (Gold etf). It turned Short on SLV (Silver etf) weekly, here is an updated NN chart.

08/12
The continued VIX (Volatility) explosion this week, reached levels we saw at the mid 2010 low in the OEX. So a volatility resistance zone is now established up there. Monday's advance-decline ratio was the most extreme reading on record. This week's low came exactly at the first Fib. support mentioned in the previous update, as seen on the OEX Weekly chart.

A re-test of the recent sell-off low is in the cards, after the current wave iv corrective phase to the upside has come to an end. The wave v should in turn complete a full five wave 3 impulse structure from July's high. So because of this upcoming wave 3 termination, more consolidation (with an upward bias) is looked for in wave 4. Wave four's in general, can often turn into complex, sideways patterns according to the Elliott Wave Principle.

From a DGL - Dynamic Gann Levels point of view, the mid week bottom formed at the key L3 line. The broken L2 support line should now instead act as a resistance area. As seen on the same chart, RSI 25 is climbing higher from a very oversold condition.

SLV weekly (Silver etf) responded to trendline support and closed near the high for the week, which is often a bullish indication.

The 20Y T-Bond etf TLT weekly managed to overcome trendline resistance this week. So this trendline should now give support instead, when tested from above.

The Neural Net system is still Short on the OEX after this week and still Long on GLD (Gold etf). Long signal is generated on SLV weekly (Silver etf).

08/05
Standard & Poor's decision to downgrade the U.S. triple-A rating, has ignited criticisms of rating agencies.

As for an update on the markets, the tide could be turning as major trendline support had to give in to bearish forces this week, increasing the odds of a completed intermediate degree wave C from the June 2010 low and with it... the Primary wave 2 scenario - a full three wave corrective structure from the March 2009 low.

When such trendlines are broken, it's often observed that prices makes a snap-back move towards it, before resuming it's new trend direction. In my opinion, these can be good points to go Short the market, with excellent Risk/Reward ratios, as the trader is able to quickly get out of the position, with any clear close above the trendline, indicating a false downside breakout happened. On real breakouts, the downside can offer good return potential, as violation of larger trendlines is usually a "hard" signal of significant trend changes, likely lasting for some time.

Prosperity is possible in a negative market environment, with for example buying so called inverse ETFs, (Exchange Traded Funds) a Bear fund which is growing when the market is declining. In fact, a whole new series of inverse ETFs are available, which investors can use as protection against declines in many major sectors like financials, real estate, consumer goods, semiconductors, technology, emerging markets and even foreign markets like China.

Even some leverage is available through special ETF's. For example, when the market makes a 1% decline, the inverse ETF will grow 2%. But then of course, with leverage, the risk of losing more will increase, when the trader is wrong on the direction of the market.

A few Bear ETFs:

Short S&P 500 ProShares (Symbol: SH)
Short Dow30 ProShares (Symbol: DOG)


Some investors have the view that buying these Bear funds is "a bet against America" and are reluctant to use them. But the positive side is that those prospering from it will be able to help rebuild the economy, in a recovery phase. Those getting wealthy from this strategy, could have the resources to i.e. build new businesses and create jobs, when the next Spring phase starts in the economy. An opinion of when this recovery phase may start, should be given in the next issue of the Market Outlook 2012 Report, which will be out at the start of the new year.

Short term, the market has reached an oversold extreme, as indicated by daily RSI-25 readings and for the very near term, by the RSI-2 double dip below 5. This, at the same time as the OEX is resting on a larger (50%) L2 DGL (Dynamic Gann Level), forming a reversal pin bar on this support Friday. But the question is how the market will react Monday, on the S&P downgrade news. Any break of this week's low, could mean more weakness coming, towards the first (38.2%) Fib. support, calculated from the March 2009 - May 2011 advance ( see weekly chart ).

Investor fear exploded this week, as reflected by the VIX (Volatility) index. It broke through important trendline resistance, with the RSI-25 soon reaching the 70 level. In the past, readings near or above 70, have indicated market bottoms around the corner. After a completed wave iii impulse sell-off in the OEX, some recovery is expected in wave iv, before likely seeing a re-test of the wave iii low, in the last wave v. Thereafter a three wave recovery could start.

Also the current Put/Call Ratio reading reflect a very oversold market, climbing above 1.20.

In a flight to safety, the 20Y T-Bond etf TLT weekly surged through the channel roof and closed up against a major trendline, coming in from 2008.

The Neural Net system turned Short on the OEX after this week but is still Long on GLD (Gold etf). Short mode is still intact on SLV weekly (Silver etf).


07/29
Q2 GDP (Gross Domestic Product) grew 1.3%, which is 0.5% less than forecasted by economists. Revised Q1 numbers surprised Wall Street, with it's 0.4% growth only.
Household purchases, which is about 70% of the U.S. economy, increased 0.1%.

According to Argus Research, the ratio of the number of insider shares that have been sold in the open market, compared to purchases, is at 6.43:1, which is higher than 95% of the other report weeks in a decade. So insiders are running from this market it seems.

A 2 day RSI currently shows a very oversold condition, (below 5) at the same time the OEX reached it's key Fib. (calculated from the June - July advance) and L1 DGL support Friday. The regular 14 day RSI doesn't give an edge in trading, according to Larry Connors's research, going back to 1995.

If you instead used a 2-RSI in your near term trading strategy, with just 4 rules, the trader would have correctly predicted the direction of the market more often than not, (over 80%, according to Connors) since 1995. The lower the 2-RSI reading below 10, the better the average performance over a 1 week period, after entry.

Long Entry Rules:

1. The OEX or S&P 500 is above it's 200 MA
2. The 2-RSI closes below 5
3. Buy the market on the Close
4. Exit when the index closes above it's 5 day MA

By back testing a daily chart manually, his statement seems believable, although you would need a good stomach at those more rare times when the market is deteriorating further (the 2-RSI stays at an oversold extreme for a few more days) before the index finally closed above it's 5 day MA, at times with a loss.

Connors doesn't recommend Stops, as this would affect the performance. But in my view, the trader should consider using a "disaster" Stop at i.e. 8 to 10% on the index, in case things goes very wrong, although it could have an impact on the performance, over the long term.

Although the margins are smaller, this strategy also gives an edge in the Short side version, when the 2-RSI closes above 98.

Anyway, this indicator can be useful for finding out when the market is ready top pop, to the upside/downside near term, so i'll probably use more of this 2-RSI indicator in my own analysis.

Also, i experimented with this strategy by adding the helpful Murrey Math Resistance/Support Lines, (created by the math genius T.H. Murrey) which can be auto plotted on the S&P 500, by using Forex Metal's free MT4 chart platform, which has the S&P 500 in the chart data base. The Murrey Math 1.0 EA is available out there on the net.

Another positive side of this strategy, is that the trader doesn't need to sit glued to the screen all day long, since it's based on daily prices, although before entry, the 2-RSI reading must be checked before the close for the day.

Well, enough rambling about this...

Investor fear is increasing, as the VIX broke through trendline resistance this week. Another trading month has just ended and the VIX monthly chart shows a close near the high, which could mean even higher volatility coming in the next month, at least intra basis.

Here are a few other observations after this trading week & month:

- QQQ Daily, five wave structure from the June low completed (possible wave 5 truncation in the OEX)
- OEX Daily, 5 - 20 EMA bearish crossover
- Weekly Cycle10 bearish reversal

- Hammer (reversal candlestick) formed on the monthly S&Ps, Nasdaq Comp, (Major Double Top forming?) QQQ (Nasdaq 100 index stock) and Dow 30 markets.

- OEX Monthly fast MACD (red signal line) made it's first bearish reversal (aggressive sell signal) since Fall 2010 but no MA crossover yet and major trendline support still intact.
So no conservative long term sell signal, after July's trading month.

-EUR/USD Monthly sold off intra-month but closed inside the channel

The 20Y T-Bond etf TLT weekly closed up against the channel roof & key Fib. zone.

The Neural Net system is still Long on the OEX and GLD (Gold etf) weekly markets. Short signal generated on SLV weekly (Silver etf).

07/22
Friday's move beyond the Spring high in the QQQ (Nasdaq 100 index tracking stock) will most likely negate the wave 2 scenario in the OEX as well, although the May high has yet to be broken in this market. So instead, the alternate a-b-c wave 4 Flat pattern from the February high to the June low, is not ruled out to be the correct labeling. Especially since the structure from the June low, looks more and more like a five wave impulse pattern, possibly the last wave 5 underway.

So this could mean the one degree higher wave C (better seen on the weekly chart) from the Summer 2010 low is still active but likely near its end, as the OEX is now within the time window of the next Gann Angle cycle convergence, due 07/21 (+/- 1day). Given the clear short term positive trend going into this GA, a bearish reversal is looked for. I addition, weekly Cycle10 has soon reached levels where it normally would make a bearish reversal.

The VIX (Volatility) ended the week near strong trendline support.

The 21 EMA of the McClellan Oscillator still holds on to its bearish mode, despite the recent days market advance. The 21 EMA of this indicator tend to show the true trend, despite of price "noise" in the market.

The NYSE New Highs - New Lows indicator is likely tracing out a bearish divergence, which will be confirmed in case the OEX takes out the early July high and the NH-NL continues to give a lower peak reading. These bearish divergences often warns about more significant tops in the making, not just minor pull-backs.

A look at the chart of weekly closing prices shows that the price position near the Apex of the two converging trendlines, forces a breakout sometime within the Summer/Fall period, whether bullish or bearish?... only time can tell for sure. However, once the directional breakout is a fact, it would probably indicate where the market is heading thereafter, mid/long term. Any positive breakout should at minimum lead to a test of the trendline coming in from 2008. A downside breakout would increase the odds of a completed intermediate wave C from 2010.

So the market is near a pivotal point, given President Obama's ongoing debt negotiations, this is an interesting observation.

The 20Y T-Bond etf TLT weekly is still trading within a positive price channel. The key Fib. zone is reached.

The Neural Net system is still Long on the OEX and GLD (Gold etf) weekly markets, after this trading week.

07/15
The OEX made a retreat this week, after the (few weeks ago) snap-back move ran into resistance from an earlier broken weekly trendline. From a DGL (Dynamic Gann Levels) point of view, this peak came up against a (50%) L2 line. On the daily chart, Cycle10 is bottoming out but has yet to make a positive reversal.

The VIX (Volatility) is still oscillating within two important (contracting) trendlines. So the directional breakout, which ought to occur before the Apex (where the two trendlines meet) is met, could set the market tone for some time thereafter. For example, a break above the upper trendline, could open up for even more fear among investors and with it, more pressure on the stock market.

The OEX high formed over a week ago, could be the completion of wave a of 2 or even a full wave 2 structure from the june low is not ruled out. If only wave a is in place, then sooner or later, the recent pivot high should be broken in wave c but is not allowed to go beyond the May high, to keep this wave 2 scenario intact. So it will be interesting to see the outcome of the next trading week.

The 20Y T-Bond etf TLT weekly has established a bullish channel looking price pattern it seems. So the overall positive trend from the early 2011 low looks intact at this point. And RSI 25 still has plenty of upside room, before reaching an overbought condition.

The Neural Net system is still Long on the OEX and GLD (Gold etf) weekly markets, after this trading week.

07/08
The OEX broke out sharply from the bearish channel a few weeks ago, after finding support on important weekly trendline support. The rebound has brought prices up for a test of earlier broken trendlines on the weekly chart. The VIX (Volatility) is at the same time resting at trendline support.

Either a wave 1 or c most likely ended at the June low. As long as the May high remains intact, the preferred wave count will stay in focus, as a wave 2 can retrace 100% of wave 1 and still remain valid. A broken May high would move the alternate wave 5 count to the forefront, suggesting a still active Primary degree wave 2 from the March 2009 low.

The Neural Nets system is still Long on the S&P 100 market, after this trading week.

The positive trend in the Bond market, as seen through the 20Y T-Bond etf TLT weekly, is still intact at this point.

06/24
After a short breather in the market, the overall bearish trend from the May high resumed mid week. Prices must break out from the established channel pattern (daily closing basis) to indicate a change in the short term trend.

The VIX (Volatility) found support on the earlier broken trendline and is pushing higher.

The blue 4/8th MML (Murrey Math Line) support is still holding, after several tests in the past few weeks. Momentum is tracing out a bullish divergence, versus the current near term double bottom in prices.

The DGL (Dynamic Gann Levels) chart shows the week's high was caused by L1 resistance. L2 support comes in around 556 Monday.

An update on the Wave development, suggest a wave iii coming to an end soon. Even the ending stages of a full five wave structure from the May high, is not out of the question, if the wave iv high already came in the first half of june. From a weekly point of view, it seems a consolidation is going on in the OEX, near strong trendline support. Cycle10 is at the same time preparing for a positive reversal, in an "oversold" extreme condition.

Also weekly closing prices have reached important trendline support, which is found right above first Fib. support. Given the oversold market condition, with bullish divergences showing up on daily momentum charts, odds are good a countertrend move will start from this support area. Any clear weekly close below this zone, would instead open up for even more weakness.

The Neural Nets turned Long on the S&P 100 market, after this trading week.

The positive trend in the Bond market, as seen through the 20Y T-Bond etf TLT weekly, is still intact at this point.

06/10
Despite more price weakness this week, in what could be a wave iii underway to the downside, the VIX (Volatility) has yet to overcome the important trendline resistance area, once again closing up against it Friday. The 21 EMA of the NYSE McClellan indicator has nearly reached levels where many short term market bottoms occurred in the past.

In Murrey Math theory, the blue 4/8th MML (Murrey Math Line) is viewed as a strong support/resistance area, this time about to be tested from above.

On the weekly chart, as the OEX closed near the low for the week, it may even go for an intra-week test of trendline support in the 555 area, before finally bottoming out short term. The March low is found a few points above, another support point which could be strong enough to force a market reversal.

Weekly Cycle 10 is now at levels where it normally would make a bullish reversal, which could fit with the March low or trendline target, before a rebound is seen. The 555 area is also roughly the first (38.2%) Fibonacci support, as the chart of weekly closing prices shows.

The Bond market, reflected by the 20Y T-Bond etf TLT weekly, managed to close above the 50% retracement zone. Key Fib. resistance is right under the 100 level.

06/03
The Non-Farm Payrolls in the U.S. economy grew by 54 000 in May, weaker than expected. As of the same month, Unemployment rate increased to 9.1 percent, from previous 9.0 percent.
 
Early in the week, the OEX attempted to break out from the price channel mentioned in the previous update but it turned out to be a false one, with prices collapsing into the channel area again. The adjusted trendline now reveals an expanding channel pattern, producing resistance around the 590 level, depending on when it gets tested.
 
This week's price weakness forced Put/Call Ratio readings above the 1.20 level. As the chart shows, in the past, readings at roughly 1.20 or above tend to come near market bottoms. The OEX has reached trendline support area, with Cycle10 at the same time entering its buy territory.
 
From a DGL (Dynamic Gann Level) point of view, Friday's close came at the strong L1 & L3 convergence support, with RSI 25 close to the 40 level. The last time this momentum indicator fell to the 40 level, it marked the significant March bottom.
 
The VIX (Volatility) needs to overcome strong trendline resistance (daily closing basis) first, to open up for more investor fear and with it, more stock market weakness, near term.
 
On the weekly chart the market closed for the week below both the support giving trendlines, which makes it vulnerable to deteriorate further, mid term, towards the next lower trendline. This support point comes in at 560 next week, in case the weakness continues, ideally after a brief rebound from daily trendline support first.
 
On the chart of weekly closing prices one can see that the first (38.2%) Fibonacci support is found right under the trendline.
 
As for an update on the Elliott Wave structure, the market could have been through a series of one-two's from the May high, as part of a wave 1 of a five wave impulse structure possibly developing from that high.
 
With another trading month behind us, all the monthly charts are updated.

05/27
Monday's VIX attempt to overcome the trendline resistance (mentioned in the previous update) failed. This occurred at the same time the OEX reached channel support. The rest of the week's OEX rebound resulted in a close up against the channel roof Friday, still keeping the bearish wave i trend from the 05/02 intact.
 
Any clear upside breakout (daily closing basis) from this channel, would indicate a change in the near term trend. The same situation is observed on the S&P 500 daily chart.
 
From a DGL - Dynamic Gann Level point of view, the market reacted up from L3 (50%) support and is about to test the L2 line from below.
 
On the weekly chart the intra-week dip and recovery close near the high for the week, formed another reversal bar, at sligthly adjusted trendline support. So given the close near its previous week's close, a consolidation seems to go on here. A trendline starting point from the Nov. 2010 low, instead of using the Aug. 2010 low, caused the low for the week.
 
The Silver etf SLV has just started a rebound phase, from trendline support. The close near its high for the week, bodes well for more to come to the upside next week, at least on an intra-week basis. Key Fib. resistance is up around 42.5.
 
The Bond market, seen through the 20Y T-Bond etf TLT weekly, made another positive close this week, well on it's way to a key Fib. target, right under the 100 level. If overcome, trendline resistance is the next likely peaking area, before a pull-back is due.
 
 
05/20
The price structure from the 05/02 high has developed enough to establish a bearish price channel in the OEX. It would take an upside breakout (daily closing basis) from this channel to indicate a change in the ongoing short term negative trend.
 
Volatility (VIX) jumped to 17.4 Friday and is probably going for a test of minor trendline resistance at around 19 early next week, as it closed near its high Friday, suggesting more to come to the upside.
Any daily close above this resistance area would open up for even more fear and in turn more pressure on the stock market. Current RSI 25 readings, shows there is still plenty of room for increased investor fear, before reaching a peaking condition.
 
As for the Elliott Wave situation, it could be the first wave i of a new bearish impulse structure, working its way lower from the 05/02 high. I admit though, the overall advance from the March low to the May high, although technically valid, doesn't exactly look like a text book five wave structure, more like a three wave a-b-c formation.
 
Because of this, i don't rule out a significant a-b-c Expanded Flat pattern formation from the February high. So this willl be the alternate wave count scenario, compared to an already ended wave 5 preferred count.
 
A look at the OEX chart of weekly closing prices now shows a break of the lower wedge line. Often, a snap-back move towards the broken trendline can be the outcome before resuming on its path lower, given its not a false break.
 
On the weekly chart a Doji candlestick formed after this week, reflecting indecision in the market. When these candlesticks makes a close at weekly trendline support like now, it can mean a market reversal is in the cards.
 
But since this is not always the case, many traders use a Stop below the Doji low for a quick exit, if wrong. In this case, it could mean a temporary rebound towards the broken trendline of weekly closing prices, as mentioned above.
 
Any convincing weekly close below the Doji and the trendline, could instead open up for more weakness in the market, in line with the current downside pressure phase in Cycle10, which has yet to reach oversold levels.
 
04/21
The OEX took one more dive Monday, exactly testing the cross of two L1 DGL (Dynamic Gann Level) support lines, before heading higher for the trendline resistance challenge, mentioned in the previous STU update. As it has a few more points to go before this area is reached, next week should reveal whether this zone (597.5) will hold or not.
 
If it's overcome, the odds of the current wave v of 5 count being a correct one, will increase. If it fails to break above it, (daily closing basis) keeping the April 08 high intact, the alternate wave count would still be a valid scenario to consider at that point.
 
The current market advance is not backed up by i.e. New High - New Low readings, which is now forming a lower peak vs the S&P 500 peak made earlier this month, reflecting underlying weakness of this upside move.
 
The VIX (Volatility) clearly closed below important support Thursday, for the first time in many months.
 
From a Murrey Math point of view, the (yellow) 7/8th MML (Murrey Math Line) is viewed as weak in this theory, so if it holds (in this case as resistance up at 609.38) sharp reversals can often be the outcome. As seen on the chart, momentum is getting overbought.
 
As the market has just entered the +/- 1 day time window of the 04/26 Gann Angle and is in a near term positive trend, this GA could very well mark the start of a pullback or even the next near term decline. It marks 180 trading days from the August 2010 top, so it could be strong enough to cause a market reversal. In general, the 90 and 180 numbers used alone, can be powerful enough to have an impact, no need to be in a cycle convergence with another GA number, to mark reversals.
 
A look at the weekly time frame, shows that the reversal this week came right on time, to avoid a break of an important trendline, on the chart of weekly closing prices.
 
 
04/15
Continued market weakness this week, brought the OEX down for a test of the first (38.2%) Fib. support, (584) where it formed a reversal candlestick Thursday, with a positive market reversal as the outcome on Friday. With Cycle10 at the same time bottomed out, odds are good a near term reactionary move from this support, could bring the OEX up for a test of daily trendline resistance (597 area) or the early April high (598.65) next week.
 
If it fails to overcome this resistance and breaks below Thursday's pivot low (582.49) thereafter, it could mean a minor a-b-c correction is developing from the April high or even that the full wave 5 from the November 2010 low, already ended at the February high. Especially so if a decline continues below key Fib. levels, based on the March - April advance.
 
So this alternate (and more bearish) view would look like this on the chart, if this turns out to be the correct labeling. But even this wave count doesn't rule out a test of trendline resistance first, before possibly heading lower.
 
Using weekly closing prices, one more down close would result in a broken trendline, which is drawn through important weekly closing lows from summer 2010. Interestingly, this seems to line up with a VIX (Volatility) closing at a long standing support line Friday, with it's RSI 25 tracing out a "bullish" divergence. So more investor fear and with it... pressure on the stock market could be the outcome soon.
 
The Neural Network system turned bearish on the market after this week, below represented by the S&P 500 index.
 
04/08
Long term, updated monthly charts now shows a reversal in quite overbought (Stochastic) momentum in i.e. the OEX and the Dow 30, although a crossover has yet to occur, so a further push towards trendline resistance is not ruled out. QQQQ RSI 25 is now leaving its overbought zone and also a Cycle10 bearish reversal in its sell zone is observed, so the longer term outlook seems bearish for the tech market as well.
 
The TYX Monthly (Yields) looks like its poised for another downside move soon, given the important long term trendlines now under attack holds. If clearly broken (monthly closing basis), an explosive growth in interest rates could be the outcome in the months and even years thereafter, which normally is not good for the stock market.
 
Mid & Short term, in retrospect, the OEX apparently went through an a-b-c correction from the February high to the March low, so a revised wave count suggest this was the wave iv part of a five wave structure underway from the November 2010 low.
 
If this turns out to be correct, once fully completed in wave v, a wave 5 (one degree higher) of C could also have reached its termination point then, which doesn't bode well for the stock market thereafter.
 
Another wave possibility is the OEX working on a more complex correction from the Feb. high, with the current advance from the March low being i.e. a wave x, before heading lower again in wave y.
 
The 03/17 Gann Angle cycle convergence worked out ok, marking a short term bottom in the market. See the chart for the upcoming GA, due later in April.
 
On the weekly chart prices have climbed higher along the earlier broken trendline. Its common to see such snap-back moves to a broken trendline, before the new trend resumes on its main path (in this case lower, as long as the Feb. high stays intact).

03/18

The OEX has broken out from the long standing channel or slightly wedge looking pattern, that developed from the summer 2010 low, better seen on this weekly chart update. The weekly RSI 25 has just left it's overbought zone, so there is plenty of room left before this market is getting oversold, mid term. The daily VIX (Volatility) reached the 30 level this week, for the first time in many months.

On the OEX daily chart, so far the market has traced out three waves from the mid February high, which could be part of a five wave impulse structure to the downside. If so, the odds will be greater that the wave c from the summer 2010 low, ended at the February high.

This in turn, could mean we're seeing the first ripples of a wave 3 impulse of Primary degree to the downside. More evidence of this Primary wave 3 degree scenario will show up, if the monthly MACD turns bearish in the coming month(s). So i'm bearish on the stock market, mid & long term, until proven wrong by a break of the February high.

 
03/04
Short term, any break below trendline support (daily chart) next week, would increase the chances of a fully completed five wave advance from the july 2010 low.
 
The VIX (Volatility) is resting on trendline support, after it broke above this line a few weeks ago. If it holds and the VIX climbs higher from here, it could lead to more pressure on the stock market, with increased fear among investors.
 
Mid term, using weekly closing prices only, one can see that the OEX has reached and backed off an important trendline drawn through the Oct. 2008 and April 2010 peaks. Any downside breakout from this Wedge looking pattern, would increase the odds of a mid term top in place.
 
The Neural Nets (updated charts below) turned bearish on the OEX weekly.
 
02/11
The 02/08 Gann Angle caused a small market pull-back only before once again moving to new highs. So the OEX is still working on the last wave 5 part, of the five wave structure developing from the July 2010 low.
 
The VIX (Volatility) is about to test strong trendline support for the fourth time since Dec. 2010.
 
The Neural Nets system (updated chart below) is still holding on to it's OEX Weekly Short signal, generated 01/28.
 
02/04
With the entry into a new trading month, updated monthly charts shows i.e. a Shooting Star reversal candlestick formed on the Nasdaq Comp, with Cycle10 at the same time well into its sell territory but has yet to reach levels where it normally would make a bearish reversal. But lower level reversals have happened before.
 
Short term, the 01/20 pivot low mentioned in the previous comment was never broken, so the OEX has continued working on the five wave C structure from the July 2010 low, climbing along trendline resistance, after minor pull-backs. The VIX (Volatility) is probably reaching strong support in a day or two.
 
Sentiment still continues to show extreme readings, reflecting an overdue top.
 
RSI 25 has traced out lower peaks vs. higher highs in the OEX, reflecting underlying weakness and warning about what is likely around the corner, a top of minimum short term degree, at least it should be larger than recent pull-backs. I.e. trendline support comes in around 575. If it fails to hold, (daily closing basis) evidence would get stronger that we're dealing with an even larger top.
 
Another technical point going in favor of the Bears, is the now several months long positive trend
(which also ignored the 12/27 GA) going into the upcoming 02/08 Gann Angle (+/- 1 day) cycle convergence, so a reversal in the opposite direction (bearish) is looked for early next week.
Will this GA have an impact? ...only time will tell, nothing is certain when dealing with the markets, only probabilities can be given.
 
The Neural Nets Output at the end of the week, also holds on to last week's Short signal, despite the recent advance (chart below).
 
The Nets turned positive on the GLD etf (Gold weekly).
 
01/21
Both the Neural Nets (chart below) and Cycle10 turned bearish on the OEX Weekly after this trading week and the daily VIX RSI closed above trendline resistance Friday, which could open up for even higher Volatility (fear) in the coming days, which can put more pressure on the stock market. 
 
A reversal candlestick formed up against a weekly trendline coming in from the Oct. 2008 rebound high. The slightly down close for the week, with volume spiking above the 50 EMA, reflect some distribution going on. So is this the top? Well, any move below Thursday's pivot low, would increase the odds of a minimum short term top in place.
 
The price development from the July 2010 low shows a clear five wave structure, which at its termination point is supposed to finish a larger a-b-c Primary wave 2 phase from the March 2009 low. Many Elliotticians knows what this would mean for the markets in the months after a mid/long term top is in place. If not already peaked, the first half of February or the upcoming March weekly Gann Angle cycle convergence, are the next likely candidates.
 
The Neural Nets Output for the GLD (Gold etf) weekly shows a bullish signal.
 
01/17
As the above daily chart shows, the OEX is still pushing higher in the last wave 5 from the November 2010 low. The Market Outlook 2011 Report, published a week ago, contains the details of likely time targets for the next top in this market.
 
Also, the upcoming 02/08 (+/- 1 day) Gann Angle cycle convergence will be interesting to observe in this regard. If the overall bullish trend continues into that time frame, this GA also holds the potential of marking a top, at least of short term degree. A near term bearish trend going into it, could instead indicate a bullish reversal.
 
As for possible price targets, if its able to overcome the trendline resistance it met Friday, then it may even go for the key L3 DGL before finally peaking. This L3 is in convergence with a L2 line coming in from the summer 2010, so it should be a tough resistance area to overcome, at least on the first attempt.
 
On the weekly chart Cycle10 is probably a week or two, from reaching levels where it normally would make a bearish reversal. The next reversal in this indicator, would increase the odds of a top in place.
 
Scroll down for the latest Neural Nets Output charts and more.
 
---------------------------------
2010
 
12/17
Short term, a five wave structured advance from the July low could be in its last stages, with the VIX (Volatility --> fear) at the same time reaching strong support. So this could also mean the one degree higher wave c from the same low is near its termination point.
 
Despite the OEX climbing to new highs in December, this is not backed up by new high readings in RSI 25, (bearish divergence) reflecting underlying weakness. And with the past as proof, when RSI 25 moves above 60, formation of minimum short term degree tops are often the outcome.
 
From a Murrey Math point of view, given the ongoing consolidation up against the strong 4/8th MML, (and the 50% resistance line on the long term chart found on the same page) with momentum at the same time deteriorating and leaving its overbought zone, near term price weakness could be in the cards, signaled by a break of this week's pivot low at 555.30.
Mid term, a bearish divergence is also observed on the weekly chart with RSI about to move above 60 but making a lower peak compared to the Double Top pattern now possibly forming in the OEX. The odds of seeing a top would increase with the next reversal in weekly Cycle10, which is still pushing higher but is now entering its sell territory.
 
Updated monthly chart was uploaded after the end of November. A Hammer looking candlestick (reversal type) formed up against strong trendline resistance, after the November trading month. Any monthly close above this trendline, would be a Short covering signal and likely a continued advance for the Primary wave 2 from the March 2009 low.
 
An alternate long term Elliott Wave count is suggesting that only the wave A of this Primary 2 could be in its last stages, because the structure can also be interpreted as a five wave pattern from the 2009 low, versus a full three wave Primary 2 scenario soon ending.
 
Anyway, the next monthly MACD crossover signal would increase the chances of a change in the market tide and probably confirm an either Primary wave 2 or A of 2 top in place. Until then, the still overall positive trend is not fighted but attention is given to alarming technical setups these days. For aggressive traders a trading opportunity could be opening up and with low risk exposure in my view.
 
11/26
Short term, the OEX daily 5 EMA has again made a downside crossover of the 20 EMA, chart below. After the breakout from the bullish channel over a week ago, a Descending Triangle pattern could be forming in the OEX these days. So the directional breakout from it, (daily closing basis) should give further clues as to where the market is heading thereafter.
 
From a Dynamic Gann Level point of view, the short term bears have been struggling with support produced by the L1 line.
 
On the weekly chart the market closed for the week on the earlier broken trendline, which still holds as support. Any weekly close below it, could open up for more price weakness.
 
On the same chart, i have now moved the Elliott Wave labels, as the S&P 500 weekly apparently made a brief violation of the April high earlier in November, suggesting the Primary wave 2 from the March 2009 low is still active. As mentioned earlier, it would take a break of the October 2007 high to fully exclude this Primary wave 2 possibility from the list of valid counts.
 
Short term, it could be an a-b-c zig-zag structured wave 4 of c working it's way lower from the Nov. 05 high. If so, a test of the Nov. high would be a probable outcome in the last wave 5 push higher.
 
If this current wave 4 overlaps the August high, (512.79) it will be excluded as a valid count, according to the Elliott Wave Principle rules. If this occurs, it could mean a full five wave structure c already ended at the Nov. 05 high.
 
11/12
The OEX made a pullback this week and is now resting on channel support. If it fails to hold and prices breaks out from this pattern soon, (closing basis) more weakness towards first Fib. support (522 area) could be the outcome.
 
Volatility (VIX daily, chart below) found support on the trendline convergence and is climbing higher. If RSI and minor VIX trendline is overcome, it would likely put more pressure on stock market prices, because it would reflect increased investor fear.
 
As for the QQQQ stock, it broke out from the Rising Wedge looking pattern at the end of the week. This could open up for more weakness in the tech market as well, towards first Fib. support, down at around 50.
 
After some time the Neural Nets system needs to be re-trained to optimize the signal outputs, so the updated charts below reflect this.
 
11/05
The OEX is just a few points away from breaking through the April high, so if this occurs the Primary degree wave 2 from the March 2009 low, apparently has unfinished business to the upside. If the April high is broken, the new preferred wave count would then be to see the pattern developing from the March 2009 major low, as an a-b-c zig-zag wave 2 pattern, (with now the wave c part underway to the upside from the July low) which would reach its negation point at the October 2007 high.
 
The last two positive days of this trading week came on above average volume, (above daily 50 EMA) indicating institutional buying. The daily chart shows an overbought extreme in terms of RSI 25 readings and the weekly chart is tracing out a bearish divergence in RSI 25 versus the OEX Double Top looking pattern at this point.
 
From a QQQQ daily (Nasdaq 100 index tracking stock) point of view, it has oscillated higher within a Rising Wedge looking pattern, with RSI 25 also here reaching an overbought extreme. Rising wedges normally breaks to the downside, when correctly identified.
 
The updated monthly chart, shows an uncommon positive Fall for the markets, with both September and October trading months closing up, keeping the long term bullish MACD mode from July 2009 firmly intact.
 
The OEX has entered the weekly 11/12 (+/- 1 week) Gann Angle time frame, which marks 90 trading weeks from the major March 2009 low. With a positive mid term trend going into it, it holds the potential of marking a top of minimum short term degree. VIX (Volatility) readings (chart below) are resting near important support, so if it holds, it would be in line with the bearish GA setup. Increased investor fear usually means pressure on the stock market.
 
The daily 10/27 GA didn't have any impact this time, with the short term positive trend ignoring the projected time frame for a potential reversal.
 
The 5 & 20 EMA and Neural Nets charts below are also updated. The OEX weekly Neural Nets output shows several recent profitable trades.
 
10/22
Scroll down for updated Neural Nets and other charts. On the DGL (Dynamic Gann Levels) chart, the OEX has reached a convergence of a larger L1 and a minor L2 line, which should produce stiff resistance and with RSI 25 at the same time found in its overbought territory.
 
If the market holds up into the upcoming 10/27 Gann Angle (+/- 1 day) it holds the potential of marking the next short term top.
 
On the OEX weekly chart a reversal type bar is observed after this trading week, with momentum and Cycle10 still showing overbought extremes.
 
The Neural Nets system is still Long on GLD (Gold etf) weekly, despite the sharp pullback this week. As for the OEX weekly, its still holding on to its Short signal from 10/15.
 
10/15
On the QQQQ weekly chart, prices broke through the April high, leading to further delay of the Primary wave 2 top scenario for the tech market. Any break of the October 2007 high (55.07) will fully negate this possibility.
 
Although technically, a delay is not yet the case for i.e. the OEX, the odds of the current preferred wave 3 scenario being a correct count is now reduced. But since its still a valid count in the SPs, only a break of the April high will force a wave revision for these markets as well.
 
VIX (Volatility) daily is getting close to the Apex of two converging trendlines. The directional breakout from it, would give more clues as to where this market is heading thereafter. I.e. if it falls through trendline support, even higher stock market prices could be the outcome. If it breaks out to the upside, on the other hand, short & mid term stock market weakness could be the result.
 
The 09/30 Gann Angle apparently didn't have any impact on the market or in retrospect, marked the end of a minor consolidation phase, with the market climbing even higher, after leaving this time window.
 
The next upcoming GA is on 10/27, +/- 1 day, if the stock market holds up or continue higher into that time frame, it holds the potential of marking a peak in the market. A near term sell-off into it however, could instead mean it will bottom out around that time.
 
The weekly Cycle10 has reached a topping extreme but has yet to make a bearish reversal, which would increase the odds of a mid term top in place.
 
09/24
This week's advance beyond the August high, forced a revision on the near term Elliott Wave count for the OEX. But still the overall picture remains the same, until the April high is taken out. If prices stalls below the April high, the wave 3 Primary degree Impulse possibility is still a likely scenario. In fact, as earlier mentioned, it would take an advance beyond the October 2007 high to fully negate this higher degree wave structure, as the Primary wave 2 scenario from the March 2009 low, would reach its negation point then.
 
In the short term, the break of the August high has only delayed the lower degree wave 2 top further, now suggesting the July low marked the wave 1 low, with an a-b-c zig-zag wave 2 corrective structure underway to the upside from this low, which has now reached an overbought condition, as indicated by the RSI 25, about to climb above the 60 level. A typical end of wave two's are at the 50% or 61.8% Fib. retracement levels. But they can't be fully negated before moving beyond the 100% retracement level (April high in this case).
 
To come up with a likely time target for the next short term top in the market, if the current short term positive trend continues into the upcoming 09/30 (+/- 1 day) daily Gann Angle cycle convergence, it holds the potential of marking the next short term top.
 
As for an update on the Neural Nets system, it turned Long again on the OEX Weekly after this trading week. The NN has been Long on GLD Weekly (Gold etf) since early August and still is.
 
Below are also updated 5 & 20 EMA and VIX (Volatility) charts.
 
09/10
A new Neural Net Short signal was generated after this trading week. See updated charts below, VIX chart included.
 
Since the August high has yet to be broken, the wave ii scenario and overall analysis from last week is still applicable.
 
09/03
 
Long term, with the August trading month just ended, a look at the monthly chart shows that the down close resulted in another bearish reversal in the fast MACD line but has yet to cross it's MA. So the positive mode generated in July 2009 remains intact.
 
The July low is a Pivot point, so any break and close below this pivot and the first Fib. support (38.2%) would probably signal a resumption of the weakness from the August high and with it... the Primary wave 3 possibility.
 
Short term, the OEX broke out from the bearish channel mid week and quickly reached the Key Fib. zone, closing slightly above it Friday but below the strong 8/8th Murrey Math line, with momentum at the same time reaching an overbought condition.
 
The VIX ignored the trendline support coming in from Spring but is now approaching the old broken channel which seems to be stiff support, so let's see if it's able to find a floor here.
 
The VIX RSI 25 could be in an "oversold" condition by then, for the first time since Spring. In the past, when it dipped below 40, often significant Volatility expansions have been the outcome, like the one started in April. Higher Volatility usually puts pressure on the stock market.
 
If this channel support also fails to hold and the OEX breaks through the August high (512.79) as a result, it would move my alternate wave count to the forefront. This one suggest the Intermediate degree wave 1 low occurred in July instead of May, with the OEX currently working on the last wave c part of an a-b-c corrective structure, developing from that low. This would delay the wave 2 top, as part of the one degree higher Primary wave 3 Impulse pattern.
 
Until the August high is taken out, the current preferred wave count stays valid though. According  to the Elliott Wave Principle wave two's can retrace 100% of wave one and still remain a valid count.
 
The Neural Net system is still Long on the OEX Weekly after this trading week.
 
08/27
 
The OEX has made a retreat in recent weeks, the 5 & 20 EMA chart (scroll down) shows a bearish crossover on 08/12. According to momentum indicators, the market has reached a short term oversold condition. Despite Friday's reversal and convincing up close, it has yet to make a clear breakout from the short term bearish channel, formed in the August trading month.
 
So it would take one more positive daily close to signal further price strength, with the 38.2% Fib. level (487 area) as a minimum upside target. A more typical target would be the key 61.8% Fib. retracement level (497). Until a clear breakout occurs, the short term bearish trend is still considered intact.
 
However, a breakout is not ruled out, as the RSI 25 and Cycle10 is now pushing higher from oversold readings. In addition, the Neural Net System (OEX Weekly) issued a new Long signal after this trading week, as the below chart shows. The Neural Net has been Long on GLD (Gold ETF Weekly) since the end of July and still is.
 
As for an Elliott Wave update, any move going beyond the early August wave 2 high (512.79) would force a revision of the wave count.
 
Scroll down for updated Volatility (VIX) chart. The VIX should reach trendline support in a day or two. If it fails to hold, it would be positive for the stock market for a few more days, until the next support zone is reached (the old broken channel line). 
 
08/13
This week the OEX broke out sharply from the Rising Wedge pattern seen on the daily chart, after strong impact from both daily and weekly Gann Angle cycle convergences. The market has now nearly reached the 50% retracement level of the advance from the June low, with Volatility (VIX) at the same time found up against trendline resistance. Any daily close above it would open up for even more fear among investors and more pressure on the stock market as a result.
 
A slightly revised wave count suggest an a-b-c wave 2 Flat pattern from the May low has ended. So chances are a wave three of three impulse structure could force the market lower in the coming weeks and months. The mental stop out level for the current short term wave count would be the wave c high. Wave 3's and C's are the strongest waves in the Elliott Wave Principle theory.
 
So given the Primary degree possibility from the Spring high, (see weekly chart) the March 2009 low could in fact be in danger sooner or later, in case this wave count turns out to be correct. Only time can tell for sure.
 
This week's weakness also resulted in a bearish weekly Cycle10 reversal, well into its sell territory. So given the early stages of a downside cycle pressure phase, the mid term outlook seems bearish to me.
 
Even the Neural Net output gave a new bearish signal after this trading week, as shown by the OEX weekly chart below.
 
 
08/06
A look at a monthly chart shows that the market found support and reversed at the first (38.2%) Fib. support, after the July trading month, with MACD bouncing off its MA as a result, keeping the long term bullish mode from July 2009 still intact.
 
With this in mind, it would take a move beyond the March high to prove that the wave 2 from the 2009 low is still in force. So this is viewed as a temporary market breather, before the wave 3 impulse structure to the downside may resume, until this high is broken.
 
Mid term, weekly prices pushed through the earlier mentioned trendline resistance area. The OEX and other markets could be near its next peak, most likely reaching its key Fib. level next week, calculated from the April - June decline. At the same time, Cycle10 should reach levels where it normally would make a bearish reversal. See weekly chart.
 
To come up with likely time points for this top scenario, the OEX is now within the time window of the weekly 07/30 Gann Angle cycle convergence. With positive weekly prices going into it, next week could in fact mark the top. I state next week because there is also an upcoming daily GA due 08/11, +/- 1 day. So the market may hold up or continue its overall positive advance into that point in time. The key Fib. level is found 8 OEX points higher.
 
This short & mid term bearish stance is supported by the bearish divergence observed in momentum, i.e. on the Murrey Math chart, where new highs in prices are not backed up by new highs in momentum. Also, in this MM theory, when prices are not able to break through the weak 1/8th MML (yellow), sharp reversals are often the outcome. A recent example is the June peak up against the same MML.
 
Another technical point supporting lower prices in the coming week(s), is Volatility (VIX) readings soon reaching strong support from the old broken channel, which is going to be tested from above. Odds are good for increased fear from that support area, also taking the soon oversold RSI 25 into account. The proof is in the chart, when RSI 25 has dipped below 40 in the past, increased volatility (lower stock market) tend to be the outcome thereafter.
 
From the Elliott Wave Principle point of view, it could be an a-b-c wave 2 Flat pattern forming from the June wave 1 low, with the c part now near its termination point, if not already so. Anyway, any breakdown (daily closing basis) of the wedge looking pattern, would signal market weakness ahead.
 
As for an update on the weekly trend chart, it currently shows mixed readings. But from a 13 - 34 EMA angle, the trend is now considered Bearish until the 34 EMA is crossed again.
 
Personally, the purpose of the trend chart is to look for trading opportunities in the direction of what the trend chart suggest, to line up with the current dominant force, which in turn could lead to better trade results over time.
 
The GLD Etf. (Gold) weekly Neural Net output turned Long again at the end of July.
 
 
07/09
The OEX upside reversal came more or less within the +/- 1 day time window of the 07/07 Gann Angle taking several days of consolidation into account. A pullback in the market is likely next week, ideally after a test of trendline resistance first, (494.5 area) so another day or two with advancing prices is not ruled out.
 
The Neural Net system turned bearish on GLD (Gold ETF) this week, after a positive period from early this year.
 
 
06/11
The price development from the May low is currently best interpreted as a Flat a-b-c structure underway. More evidence of this will show up with any daily close above trendline resistance and the 50% retracement area.
 
If the near term advance continues into the upcoming 06/15 Gann Angle cycle convergence, a pullback starting around that day is not out of the question. The VIX (chart below) break of trendline support could turn out to be positive for the near term bulls, if the market is able to push prices through the OEX daily trendline on a closing basis.
 
Positive for the Bulls could also be the bottoming weekly Cycle10 and the still intact weekly trendline and first Fib. support. But it would take one more weekly up close to open up for even higher prices thereafter. So until this occurs, the market is currently in a vulnerable position, to instead fall back for support again. Especially since the OEX is just a few points from reaching it's daily 20 EMA, where the market tend to make near term reversals. The 5 - 20 EMA has been in bearish mode since early May (chart below).
 
 
05/21
 
Wave iv of (1) completed up against a resistance line drawn through the April lows. On the weekly chart, it peaked up against the earlier broken trendline. This is a valid wave count as it didn't overlap the wave i low, although wave four patterns tend to be more complex in nature, than this simple a-b-c zig-zag from the May low.  The last wave v forced prices back for a test of the wave iii low, as expected from a wave five, excluding the more rare truncated wave five scenario.
 
Odds are good Friday marked a near term low in this market, as RSI 25 once again dipped below the 40 level this week, as it did with the wave iii low earlier in May. Prices also reached the key L3 DGL support area, before reversing intra-day Friday.
 
In addition to most likely being the last wave v of this impulse structure from the April high, another technical point supporting a reversal, is that prices have entered the 05/24, +/- 1 day time window of the next Gann Angle cycle convergence now due. Because the trend was bearish into this GA, a reversal in the opposite direction is looked for. Minimum upside target is first Fib. resistance around 510.
 
A look at some weekly charts, shows that i.e. Cycle10 is now well into it's buy zone (bellow 40) and S&P 500 weekly trend mode is still Bullish, as the 13 -34 EMA has yet to make a crossover and the 64 EMA still holds as support.
 
Scroll down for updated daily 5-20 EMA and VIX (Volatility) charts. The higher high in the VIX but lower peak in RSI 25 (divergence) gives support to the near term bottom scenario.
 
 
05/07
 
A sharp correction in OEX prices brought the market below weekly trendline support. This broken trendline should now act as resistance instead, which comes in at around 535 next week. The 5-20 EMA and the Volatility (VIX) charts below are updated. The 5 - 20 EMA entered bearish mode a few days before the price collapse. Volatility (fear) readings exploded this week but has now reached an "overbought" state, as indicated by RSI 25. In addition, the Neural Net system turned Long after this trading week.
 
From the Elliott Wave Principle point of view, Intermediate degree wave 1 of the earlier discussed Primary degree wave 3 impulse scenario, pushed prices sharply lower. A re-test of the recent low is not ruled out in the last wave v to the downside, which has yet to begin.
 
 
04/30
 
With the April trading month now ended, a look at the OEX Monthly chart, shows a bearish reversal candlestick (Hammer) formed near key Fib. resistance.
 
And this week's break of the mid April weekly low, also increased the odds of a mid term top in place. More evidence of this will show up if the 04/27 pivot low fails to hold this coming week. Because of the current look of the pattern developing from the April high, there is a chance of a complex wave four pattern underway. If this turns out to be the case, this would mean the wave Z is still active and one more push higher could be the outcome, in the last wave five, likely testing the April high. But if the 04/27 pivot low and channel support gives in to the bearish forces right away next week, it would probably exclude this scenario from the list of likely events.
 
It would only take one more lower close in OEX daily prices to see a clear 5 - 20 EMA crossover to the downside (chart below). This is one possible way to go, in an attempt to ride upcoming bearish moves to the downside, in case the Great Bear Market from 2000 has resumed, now possibly in the early stages of a wave 3 of C impulse to the downside. Much stronger evidence of a resumed bear market would show up with the next bearish crossover on the weekly 13 - 34 EMA trend chart, which is still in bullish mode.
 
Any break of the April high (low risk stop out level) would prove me wrong though and could delay a top even further, excluding a wave 5 Double Top scenario, with a potential brief break of the April high, before heading lower in wave 3.
 
As for an update on the VIX (Volatility) chart, increased fear among investors this week, brought the VIX near channel resistance (scroll down for updated chart). Any clear break of this resistance, would open up for even more volatility and put more pressure on the stock market, short & mid term.
 
 
04/16
 
To share with you a few interesting market observations after this week's close, the weekly S&P 500 prices have now reached the 62% key Fibonacci zone, calculated from the 2007 - 2009 decline. 60 - 70% of the time, in any time frame, the markets wants to reach this important Fib. level, before making a reversal. So the odds in favor of a top have increased. The OEX is at the mid point between the 50% and 62% retracement level though but this week's close came up against a trendline coming in from the Dec. 2008 peak.


S&P 500 weekly chart



Here is also a few other technical reasons why the markets could soon roll over, with weekly trendline support as a minimum downside target. In general, weekly RSI 25 readings above 60 often alerts of market tops soon to be formed. In fact, this week a S&P 500 reversal type of candlestick formed up against the key Fib. resistance area, on heavy volume. This, in addition to it's down close for the week, reflect distribution and institutional selling going on.

The first down close in 7 weeks also resulted in a Cycle10 reversal, which has been in a positive cycle pressure phase since mid February, apparently catching a large chunk of the price trend from the Feb. low. So any break of the week low at 1186.77 (OEX 542.52) would further increase the odds of a top in place.


OEX weekly chart



Growing fear among traders and investors is also observed, as the daily VIX (Volatility) chart shows a breakout from a near term falling trend. A test of the upper channel line is not ruled out in the coming days.

As for an update on the Elliott Wave Principle count, despite further delay caused by the break of the January high, (stop out level) the overall advance from the March 2009 low is (although extended) still viewed as a Primary degree wave 2 scenario finally coming to an end, if not already so, as the 62% is a typical retracement for wave 2's in general. This wave count remains firmly intact until the Oct. 2007 high is taken out.

Any clear break of OEX weekly trendline support would most likely confirm a top of minimum mid term degree in place at that point. If it holds, more price oscillations to the upside within these two converging trendlines could be the outcome but possibly not taking out the current high. In the OEX, these two trendlines will meet in mid July, so a breakout ought to occur before that point in time.

The lower degree waves from the March 2009 low traces out a likely w-x-y-x-z looking pattern but who knows for sure... it could also be a large a-b-c pattern developing. In the bigger picture it's not that critical to be 100% correct about the lower degree waves, as long as we know the market still trades below the Oct. 2007 peak and if larger trendline support fails to hold at some point, the valid wave 3 impulse scenario to the downside simply can't be ignored.

Below is also a re-trained Nerual Net and updated weekly OEX signal chart, which turned bearish after the close for the week. The previous Long signal was generated in mid February. The Neural Networks used is from the Sidekick Edition of the Stock Assault 2.0 software. 
 

04/09

Daily prices have oscillated higher within a bullish channel looking pattern, with RSI 25 reaching an overbought extreme. Any downside breakout from this channel, would increase the odds of a short term top in place.
 
From a Murrey Math point of view, Friday's trading session closed up against the (green) 3/8th MML (Murrey Math Line). In this theory the 3/8th - 5/8th range is viewed as difficult to enter and can lead to reversals as a result.
 
Weekly OEX prices reached trendline resistance this week, with weekly Cycle10 at the same time reaching levels where it has made many bearish reversals in the past. This upside cycle pressure phase has catched a large chunk of the overall price trend on the Long side, after this indicator reversed at oversold levels in mid February.
 
03/19
The wave 2 scenario from the Feb. low is now excluded from the list of valid counts, as the OEX climbed above the Jan. high this week. So the larger degree wave 2 from the March 2009 low apparently had unfinished business to the upside. This wave 2 possibility can't be ignored until the Oct. 2007 high is broken.
 
Short term, prices pulled back from the key L3 DGL at the end of week, which also resulted in a RSI 25 reversal, in it's overbought territory, alerting of a possible short term top forming. However, after an ended pullback, a retest of Friday's high first, is not ruled out before this market could be heading lower.
 
03/12
In the S&P 500, the wave 2 scenario is now excluded from the list of valid wave counts, as it broke through the Jan. high this week. This is not yet the case in the OEX, so i'll still label it as a wave 2 until/if the Jan. high is also broken in this market, joining the leading S&P 500. I'll come up with a revision of the OEX wave count at that point.
 
Using traditional technical analysis, i don't rule out a Double Top pattern in the OEX or at least a pullback towards trendline support or the 20 EMA, from the Jan high. But it has to overcome the now reached trendline resistance first, discussed in the previous update. If it's not able to break through, it could form a near term top at current levels. The next trading session should give more clues.
 
The OEX has also reached the key L3 DGL (Dynamic Gann Level) area, with RSI 25 at the same time entering it's overbought zone.
 
 
03/05
The OEX pushed prices through the key Fib. resistance (512) area this week, reducing the odds of the wave 2 scenario from the Feb. low, although it's still a valid count as long as the Jan. high at 530.74 remains intact. A wave 2 can't retrace more than 100% of wave 1, to stay valid.
 
Let's see if the OEX finds resistance early next week, (524 -525 area) using a slightly adjusted daily trendline drawn through important closing lows in the past, instead of using only the lows. If overcome, this market is likely going for a test of the Jan. high, possibly forming a Double Top pattern. Any move beyond the Jan. high though, could lead to a further dealy for the larger top scenario, into Spring.
 
Using a weekly closing prices chart, the OEX closed up against a trendline coming in from the Summer 2008. Weekly Cycle10 is in the early stages of an upside cycle pressure phase.
 
02/05
 
The lower channel line on the daily chart above is adjusted to go through the lows instead of the closing lows, as the reaction up early in the week, apparently met resistance from this trendline, which resulted in a sell-off for the rest of the week. It ended right below the 200 EMA before a recovery move brought the OEX above it again, so this long term EMA is still intact on a daily closing basis.
 
Friday's bullish reversal candlestick (closing near it's high) showed that buyers came to the market at the end of the week, which could lead to a near term reversal next week, signaled by a break of this candlestick's high (492.07). Friday's trading session closed at the earlier broken minor trendline from January.
 
This near term bullish stance is taken at a time the weekly Cycle10 is bottoming out and a five wave structure (Wave 1) from the Jan. high also seems completed. So an a-b-c zig-zag rebound could start next week, which could take prices up for a test of the 20 or 50 EMA or even the channel line is not ruled out. A move below Friday's low, (481.80) would prove me wrong about this bullish view and could delay a near term bottom further.
 
The OEX weekly Neural Net Signal Output is still Long at the close for the week.
 
I'll be away on travel for the rest of February, so the next update will be in early March.
 
01/08, 2010
 
The OEX push to new highs in the first trading week of the new year, resulted in a Cycle10 whipsaw signal, as it had just started on a new downside pressure phase at the end of 2009. Prices followed minor trendline resistance higher throughout this week, resulting in a Cycle10 reading at levels where it normally would make a bearish reversal. 
 
A bullish price channel from the Fall 2009 is established. As long as prices stays within this channel, the overall trend higher should be intact. Weekly key Fib. resistance is around 575, a likely target before the mid term trend could change.