2012 Updates


12/14
Wednesday's high was an accurate hit to the L1 DGL (Dynamic Gann Level) resistance.

The wave (iv) possibility outlined in the previous comment is excluded from the list of valid counts, as a wave (1) (Sept. low) overlap occurred this week. After a revision, the price pattern from the November low is now best interpreted as a three wave w-x-y pattern, (which probably ended at Wednesday's high) as part of a one degree higher wave 2 corrective phase to the upside. An alternate count is to see this as an ongoing a-b-c correction from the Sept. high, with the wave b part now completed. So both counts could bring weakness for the stock market.

Thursday's breakout from a Wedge looking pattern increases the odds of a short term top in place, although this has yet to be confirmed by a MA crossover in the NYSE Summation Index indicator. As Friday's close came near the low for the day and Stochastic momentum is not yet oversold, further weakness towards the first Fib. support (S&P 500: 1402, OEX: 638.5) is likely, early next week. RSI-2 should have reaced an oversold extreme by then, probably generating an upside reaction, towards the same trendline it tested mid week.

A look at Volatility - VIX daily shows it's facing resistance next week, from a trendline coming in from the June low. If overcome, more serious price weakness could be the outcome for the stock market.

As for the weekly chart, this week's trading session formed a Hammer reversal candlestick up against the earlier broken trendline, giving support to the bearish view. So any break of the Hammer low (641.52) in the coming week(s), would be further evidence of a top in place.

S&P 100 BPI (Bullish Percent Index) daily Sentiment

The 20Y T-Bond etf TLT weekly should make a directional breakout from a symmetrical Triangle pattern soon. So any weekly close above trendline resistance would be bullish for the Bond market. A weekly close below trendline support, on the other hand, could have the opposite result.

The Neural Net System (Re-trained 10/26) is still Long on the OEX weekly market.

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.

11/30
First, Larry Connors is freely giving out his "An Introduction to ConnorsRSI" these days, a 43 page .pdf report which can be downloaded here. Please share it with your trading friends, they will be glad you did. If you have problems downloading from this link, the guide can also be found on his blog. His quantitative research states that this indicator, if used correctly, can give an edge in trading. Test results is starting from page 21.

Some facts about the Eurozone situation:

1. The economies have contracted for two consecutive quarters, for 17 out of the 27 EU countries.
2. Unemployment has reached a fresh all-time record high of 11.7% in the Eurozone.
3. France has lost Moody's AAA credit rating.
4. All over Europe industrial production is declining, 7% year-on-year in Greece and Spain, 4.8% in Italy and 2.1% in France.
5. Even in more stable economies like Germany, factory orders fell 3.3%, as of the September reporting.
6. Greek government debt is estimated to reach 189% of GDP by the end of the year.

Because of the size of the European banking system, a debt related collapse in this area could affect the global economy.

As for the long term technical situation in the markets, despite the intra-month dip and test of monthly trendline support in November, the trading month ended with a market recovery, closing near the high and keeping the overall positive market trend and MACD bullish mode intact.

But given the large contracting trendlines, something has to give in sooner or later, before the Apex is reached. Whether a positive or negative breakout will occur, only time can give the answer. Any downside breakout (monthly closing basis) would give more evidence of a long term top in place and increase the chances of a completed Primary degree wave 2 from March 2009.

A positive breakout, on the other hand, could mean still unfinished business to the upside, possibly ignited by a Christmas rally. As mentioned before, the negation point for this Primary wave 2 scenario would be the October 2007 high. Here is also an updated S&P 500 & RSI 25 monthly chart.

A look at long term Volatility, shows the VIX monthly major support line in still intact condition after November. It will be interesting to see the situation after the December trading month, to get further clues of where the stock market is heading thereafter.

Using the GLD ETF as a proxy, a similar pattern is developing in the Gold market, awaiting a directional breakout from contracting trendlines, which could set the tone for Gold prices for some time thereafter.

The same goes for Light Crude Oil prices, which are oscillating within a tighter and tighter trading range, because of the two trendlines.

The Real Estate market, here reflected by the Dow Jones REIT index broke out from a long term bullish trend in the Fall, near the 2007 high (Double Top) but has closed more or less at the same level for the past 3 months. The September high and the November low, are important pivot levels to watch.

The USD monthly chart still shows an intact bullish price channel from the 2011 low.

As for long term interest rates, the TYX monthly reached roughly the 31 level in November before pulling back. Support is down around 25. Any monthly close above trendline resistance would open up for even higher rates.

Mid term, a snap-back move has brought prices up for a test of the earlier broken trendline, as seen on this OEX weekly chart. Any break of the Hammer candlestick low, would signal a resumption of the overall bearish trend from the September high. A minimum downside target would then be the November low or another test of first Fib. support, found a few points lower. A weekly close above this trendline resistance, on the other hand, could open up for a further advance, towards the September high.

The next weekly based (mid to long term) Gann Angle cycle convergence is due this week (11/30, +/- 1 week). Given the recent weeks advance into this time window, it could mark a top in the market. I've also calculated a new GA, coming up in January 2013 (01/27, +/- week). It marks 90 weeks from the May 2011 high, 135 weeks from the June 2010 low and 144 weeks from the April 2010 high. So it's a powerful GA which could cause a change in the trend around that time. Bullish or bearish reversal? It depends on the directional trend going into the GA time window.

Short term, the S&P 500 market has climbed well above the suggested 1380 target, now nearly reached the key 62% Fib. level and at the same time getting overbought, with RSI-2 and Stochastics tracing out bearish divergences vs. the new high in prices. Friday was an Inside Day (trading within the range of the previous day) reflecting indecision among investors. A breakout from this indecision is signaled with a break of either Friday's high or low, in Monday's trading session. I.e. a break of the low would indicate further weakness towards trendline support, in the 1400 - 1405 zone.

As long as the Sept. wave (i) low is not touched, this advance from the Nov. low can be interpreted as a wave a or even a full wave (iv), according to the EWP. Once terminated, a wave b or (v) should take prices lower. There is also a chance the Nov. low marked a full five wave structure (wave 1) with a wave 2 now underway to the upside. Anyway, all these scenarios should end up in a bearish reversal, the difference is in the downside magnitude for the various wave scenarios.

S&P 100 BPI (Bullish Percent Index) daily Sentiment reacted up from trendline support this week.

The 20Y T-Bond etf TLT weekly is overall going through some weakness, after the earlier mentioned Pin bar, up against trendline resistance, warned about this a few weeks ago. Support is around 122 - 123.

The Neural Net System (Re-trained 10/26) turned Long on the OEX weekly 11/16.

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.

11/16 The S&P 500 reversed at key Fib. support Friday, after RSI-2 dipped under the 5 level the day before. The close near the high indicates more to come to the upside next week, possibly back towards the earlier broken trendline, around 1380 for the SPX and 630 for the OEX. Any daily close above this strong resistance zone, could mean even higher prices thereafter.

Put/Call Ratio readings left it's oversold territory after Friday's reversal in prices.

Although not text book looking, the price weakness since the October secondary high, can be interpreted as a minor degree wave (iii) with a wave (iv) corrective phase now possibly starting to the upside.

The NYSE Summation Index trend indicator has yet to turn bullish though, (3 EMA crossover) despite Friday's positive market reversal.

Volatility (investor fear) is decreasing but the VIX shows that it needs to break through trendline support first, before the horizon is more clear for higher stock market prices.

S&P 100 BPI (Bullish Percent Index) daily Sentiment reached trendline support Friday.

The 20Y T-Bond etf TLT weekly trendline resistance is still intact, forming a Pin Bar up against it, after this trading week. This is often a reversal warning, so Bond prices could be heading lower next week.

The Neural Net System (Re-trained 10/26) turned Long on the OEX weekly 11/16.

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.

11/09 On the daily chart, the 50% retracement area is reached, with RSI-2 at the same time reversing from an oversold reading (although not an extreme one) and with Put/Call Ratio readings about to enter it's oversold territory. The VIX has yet to overcome trendline resistance, around the 19 level.

From a DGL (Dynamic Gann Level) point of view, prices found support on the L1 DGL, closing at this line Friday.

The overall weakness from the September high, has resulted in a test of the daily 200 EMA and also a downside breakout on the OEX weekly chart. But this has also generated a quite oversold reading in weekly momentum, which seems ready to turn up. So a snap-back move towards the broken trendline(s) could start soon, after ideally forming a weekly reversal bar first, which may also test the 38% weekly Fib. support, at it's intra-week low. A break of this week's low would indicate more weakness coming, towards the above mentioned Fib. support area. Only time can tell about the real outcome though.

S&P 100 BPI (Bullish Percent Index) daily Sentiment is updated.

The 20Y T-Bond etf TLT weekly broke out from the bearish channel this week and closed up against the earlier broken trendline. Any weekly close inside this Wedge pattern, could open up for even higher Bond prices. A reversal here, on the other hand, could mean a three wave corrective phase has ended and see a resumption of the overall negative trend from the summer high.

The Neural Net System (Re-trained 10/26) is still Short on the OEX weekly.

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.

11/02 With another trading month just ended, a look at the S&P 100 and S&P 500 monthly charts, shows prices pulled back from the major trendline and upper Wedge lines in October. From a DGL - Dynamic Gann Level point of view, this major resistance area is caused by a long term L2 DGL projected from the 2002 monthly closing low.

Any clear downside breakout from this Wedge (monthly closing basis) would increase the chances of a long term top in place. So this support around 630 is an important level for the long term Bulls.

But mid term, the OEX must first fall through the lower trendline it's now resting on, as seen on the weekly chart. Weekly momentum is also in oversold territory.

Near term, the NYSE Summation Index is still in a firm down trend, after this short trading week. But another price reaction up from the first Fib. support (642) or daily trendline (638) area is looked for, early to mid next week. In the S&P 500, this would be down at 1395 to 1398.

Any daily close below Fib. support, could open up for even more weakness, towards the 50% retracement area. Or to the L1 DGL as seen on the daily DGL & RSI 25 chart, in case the pivot low (made under a week ago) is taken out. Volatility - VIX daily is facing resistance around the 19 level.

Here is the price action for the week, seen through a S&P 500 15 minute chart.

The USD Monthly seems ready to push higher in the coming month(s), forming a reversal bar at channel and 50% retracement support, after the October trading month. This also fits with the outlook for the stock market, as the USD tend to go in the opposite direction of the stock market.

S&P 100 BPI (Bullish Percent Index) daily Sentiment is updated.

The situation in the 20Y T-Bond etf TLT weekly is more or less the same, still trading within a bearish channel.

The Neural Net System (Re-trained 10/26) is still Short on the OEX weekly.

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.

10/19
The S&P 500 market has stair stepped lower since the last update and broken out from the long standing bullish channel. By zooming into the finer waves using a 15 minute chart, one can see that the move from the recent swing high, developed in five waves, giving support to the view that an important top was made in September. Also, Volatility (investor fear) using VIX daily as a proxy, has increased and broken out to the upside, through the resistance area mentioned in the previous update.

The OEX Weekly chart shows Wedge support is nearly reached but weekly momentum has yet to reach an oversold condition. It's crucial for the long term positive trend, that at least the lowest wedge line candidate holds. If not, there would be increasing evidence of a change in the long term market tide, as any breakout from a Rising Wedge of this size, would indicate significantly lower prices ahead.

This COT Video by Steve Briese reveals that Commercial traders, as published by the Commitment of Traders Report, have been steadily increasing their net Short positions, in the recent 4 months market advance. Where the smart money goes, so could the market, sooner or later.

Near term momentum in the S&Ps are oversold, so a temporary snap-back move up towards the broken daily price channel could start any day now, although the NYSE Summation Index currently is in a firm down trend. Time will tell if this stiff resistance area is strong enough to cause another reversal lower and a resumption of the overall bearish new trend from the Sept. high. A confluence of minor trendline and channel resistance is up around 1470 for the S&P 500 and roughly 675 for the OEX, an even stronger resistance zone.

A look at the DGL chart (Dynamic Gann Levels) shows that the recent swing high was caused by the L1 DGL, acting as resistance, after the market broke below this line, a few weeks earlier. With a minimum mid term bearish trend likely underway, I've projected new DGL's for future support levels, based on the May - September advance. The first L1 DGL support area is down around 1380, depending on when this support line is reached.

I've calculated a new weekly Gann Angle cycle convergence for the S&P 500 market. 11/30 (+/- 1 week) marks 90 weeks from the March 2011 low and roughly 135 weeks from the May 2011 high.

S&P 100 BPI (Bullish Percent Index) daily Sentiment is updated.

The 20Y T-Bond etf TLT weekly is still trading within a bearish channel, this week closing up against channel and trendline resistance.

The Neural Net System (Re-trained 09/21) is still Short on the OEX weekly.

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.

10/12
The S&P 500 market has stair stepped lower since the last update and broken out from the long standing bullish channel. By zooming into the finer waves using a 15 minute chart, one can see that the move from the recent swing high, developed in five waves, giving support to the view that an important top was made in September. Also, Volatility (investor fear) using VIX daily as a proxy, has increased and broken out to the upside, through the resistance area mentioned in the previous update.

The OEX Weekly chart shows Wedge support is nearly reached but weekly momentum has yet to reach an oversold condition. It's crucial for the long term positive trend, that at least the lowest wedge line candidate holds. If not, there would be increasing evidence of a change in the long term market tide, as any breakout from a Rising Wedge of this size, would indicate significantly lower prices ahead.

This COT Video by Steve Briese reveals that Commercial traders, as published by the Commitment of Traders Report, have been steadily increasing their net Short positions, in the recent 4 months market advance. Where the smart money goes, so could the market, sooner or later.

Near term momentum in the S&Ps are oversold, so a temporary snap-back move up towards the broken daily price channel could start any day now, although the NYSE Summation Index currently is in a firm down trend. Time will tell if this stiff resistance area is strong enough to cause another reversal lower and a resumption of the overall bearish new trend from the Sept. high. A confluence of minor trendline and channel resistance is up around 1470 for the S&P 500 and roughly 675 for the OEX, an even stronger resistance zone.

A look at the DGL chart (Dynamic Gann Levels) shows that the recent swing high was caused by the L1 DGL, acting as resistance, after the market broke below this line, a few weeks earlier. With a minimum mid term bearish trend likely underway, I've projected new DGL's for future support levels, based on the May - September advance. The first L1 DGL support area is down around 1380, depending on when this support line is reached.

I've calculated a new weekly Gann Angle cycle convergence for the S&P 500 market. 11/30 (+/- 1 week) marks 90 weeks from the March 2011 low and roughly 135 weeks from the May 2011 high.

S&P 100 BPI (Bullish Percent Index) daily Sentiment is updated.

The 20Y T-Bond etf TLT weekly is still trading within a bearish channel, this week closing up against channel and trendline resistance.

The Neural Net System (Re-trained 09/21) is still Short on the OEX weekly.

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.

09/28
A follow up comment to the previous one. With another trading week and month ended, the charts are flashing market warning signals, in both these time frames. The overbought weekly Stochastic turned bearish, which increases the odds of mid term weakness coming. Any breakout (daily closing basis) from the bullish price channels, found on the OEX daily and S&P 500 daily charts would further signal this.

Also many monthly charts shows alarming setups, after the September trading month. Both the OEX monthly and S&P 500 monthly made a retreat from it's high and closed for the month up against Wedge and trendline resistance. In the OEX case, the major trendline from 2000 is still intact.

So any break of the Sept. low (S&P 500: 1396.56 - OEX: 641.91) could signal price weakness towards Wedge support, to come up with a minimum downside potential. If this Wedge support fails to hold (monthly closing basis) it could open up for even more weakness, long term. A more conservative approach would be to wait for the next crossover in monthly MACD, before considering a long term stock market exit, at least on the Long side.

The Dow Jones REIT Index seems to form a major "Double Top", a technical pattern which can be quite bearish in nature. The REIT tested the 2007 major High in September, made a retreat and at the Close for the month, formed a similar Hammer (Shooting Star) candlestick observed at the 2007 peak. When the market behaves like that, at major resistance levels, it's usually a market reversal signal. There is also a strong RSI-25 bearish divergence vs. this Double Top formation.

The Oil market, here represented by XOI monthly - AMEX Oil index, went through a similar monthly trading session, testing major trendline resistance at it's high, before pulling back strongly and closing in the lower part of the trading range, reflecting sellers taking over in the market place. Also here, a break of the Sept. low, would most likely signal price weakness towards trendline support, (1180 area) as a minimum downside target.

Gold monthly is pushing higher from a completed Triangle pattern ( likely a 4th wave) and is facing tremendous resistance from the old channel it broke out from in 2011. A 5th wave Double Top pattern could be the outcome also here soon, given the bearish RSI-25 divergence developing.

As mentioned it could a few months ago, the TYX monthly (30 year T-Bond Yield) has climbed higher, testing trendline resistance at it's high for the month but closed at mid range. A penetration of this resistance (closing basis) would indicate even higher interest rates thereafter. Stiff resistance is produced by the trendline coming in from the 80s, a likely target long term, if the minor trendline is overcome, sooner or later.

As for the USD monthly it's currently in a corrective phase but an overall bullish channel from 2011 is still intact after September. The low was caused by channel and 50% retracement support + support from a flat trendline from 2011. If the stock market is heading lower in October, a resumption of the long term upside path, could be the result for the buck.

A look at a long term Volatility (fear) chart, the VIX monthly shows that a many year long standing support, remains so after the September session. A breakout, either positive or negative, should be seen before the Apex of the the two converging trendlines is met. An upside breakout, would indicate trouble for the stock market, long term.




S&P 100 BPI (Bullish Percent Index) daily Sentiment is updated.

The 20Y T-Bond etf TLT weekly closed above the earlier broken trendline but the bearish channel pattern is still intact after this week.

The Neural Net System (Re-trained 09/21) turned Short on the OEX weekly.

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.

09/21
The market has stretched out to the upside but the new preferred wave count offered in this update and also other technical factors, suggest the market is topping out these days and not only for the short term. The advance from the summer low could be a wave 5, as part of a five wave Impulse structure developing from the November 2011 low.

This is barely a valid wave count though as the Dec. 2011 wave 1 high was close to being overlapped by the June 2012 wave 4 low. According to the EWP, a wave four can't overlap wave one and still remain an active count.

Other technical factors supporting this bearish stance, was i.e. a heavy Volume spike observed Friday (going well above it's 60 day moving average) with the market making no price progress. This could mean heavy distribution going on, a sign of a topping market, which is also supported by overbought daily RSI-25 readings. We have to go back to March to find similar heavy trading volume, without any price progress, which occurred right before the important April top.

In addition, we can't come around the historical and seasonal fact that October trading months tend to be negative for the stock market, often with sharp sell-offs as the outcome. Several key indicators like overbought Put/Call Ratio readings these days and a strong bearish divergence found in i.e. the NYSE Summation Index, tells something is brewing in the market. Even sentiment, the BPI - Bullish Percent Index is once again facing tremendous resistance soon.

Volatility (investor fear) is resting at strong trendline support, as seen on this VIX daily chart. Given the weak technical situation of the market, odds are good this strong support will hold, generating a higher volatility outlook. Any upside breakout from this triangle, would not bode well for the stock market, mid & long term. Although not expected, any downside breakout could lead to the opposite, even higher stock market prices.

A look at the S&P 500 DGL (Dynamic Gann Level) chart, shows the L1 DGL line now acts as support, after prices finally broke through it over a week ago. Any break below the RSI-25 support line, would be stronger evidence of a top in place.

The same goes for the weekly Stochastic indicator. The next bearish crossover here would increase the odds of mid term stock market weakness coming. The same chart shows this week was an Inside Week, trading within the range of the previous trading week (reflecting investor indecision).

As for an update on the weekly S&P 500 08/13 Gann Angle cycle convergence, this time it apparently marked only a minor pullback in the market, before resuming it's path higher.

Long term, bearish divergences found in the Bank sector versus the S&P 500, are often a warning about what's in store for the stock market. This BKX vs. SPX chart shows several lower peaks in the Bank index, compared to the S&P 500 higher highs, made in 2011 and this year.

These are symptoms of a not healthy market and gives support to the countertrend wave 2 scenario of Primary degree, developing from the March 2009 low. This is still a valid long term wave count, as long as the Oct. 2007 major high stays intact.

It will be interesting to see whether the OEX monthly is able to close above the major trendline or not, after the September trading month. Any selling pressure going into the end of the month, could form a reversal type of candlestick. If this happens up against major resistance, its often a powerful indication of stock market weakness coming, especially when bearish divergences in important indicators and other markets, warns about this too.

A Rising Wedge pattern forming in the OEX and S&P 500 monthly, is not ruled out. Rising Wedge patterns often leads to sharp sell-offs, once completed.

Bond market trouble?
The 20Y T-Bond etf TLT weekly could also be in trouble. It broke out from its long term positive trend a few weeks ago, with a snap-back move towards the broken trendline observed this week. If it holds and prices breaks below the pivot low made 2 weeks ago, it would be a signal of more weakness coming in the Bond market and with it, higher interest rates.

The Neural Net System (Re-trained 09/21) is currently Long on the OEX weekly.

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.

08/24
With this week's break of the April high in the S&P 500, a revision of the preferred wave count has to be done. With the Minor degree wave 2 scenario from the June low now excluded from the list of valid counts, a potential a-b-c corrective pattern from the April high is now moved to the forefront, with the c part possibly already started. So even this count has an overall bearish nature, only the downside magnitude is different.

If prices makes a downside breakout from the Rising Wedge pattern next week, it will give more evidence of an actual impact from the 08/13 weekly Gann Angle, mentioned in the previous comment. Below is an excerpt:

..."Next week the S&P 500 market is entering the 2 week time window of the weekly 08/13 Gann Angle (+/- 1 week). So given the clear positive trend from the June low going into this GA, a reversal of larger than short term degree could be due soon, as weekly based GA's tend to locate the Intermediate/Long term reversals in the market but not always.

This GA marks 45 trading weeks from the Oct. 2011 bottom, 135 TW from the Jan. 2010 high and 180 TW from the March 2009 major low. So it's an important GA cycle convergence, which could mark the start of a powerful wave 3 Impulse to the downside, a valid view as long as the April high stays intact."...

Near term, the market should next week once again facing resistance from the L1 DGL (Dynamic Gann Level) mentioned in the previous update. As seen on the same chart, this week's move to new highs is not backed up by RSI-25, which is tracing out a bearish divergence, a warning about what is around the corner for the stock market.

Also, a look at the OEX Weekly chart shows it's pulling back from strong trendline resistance, with overbought momentum at the same time turning bearish. A bearish Stochastic crossover is a stronger signal of price weakness coming, especially when it's caused by a reversal type of candlestick, like this week.

From a VIX (Volatility) point of view, any upside breakout from the channel, would be stronger evidence of a top in place.

S&P 100 BPI (Bullish Percent Index) daily Sentiment is updated.

The 20Y T-Bond etf TLT weekly reacted up from trendline and 50% retracement support this week, so the overall positive trend is still intact in this market.

The Neural Net System (Re-trained 08/03) is Short on the OEX weekly.

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.

08/03
Long term, the monthly MACD bullish mode, the April high and the major trendline resistance seems intact after the July trading month. Updated OEX and S&P 500 monthly charts. A breakout, either positive or negative, should occur before the Apex of the two converging major trendlines is reached. In the S&P's, Hammer looking, reversal candlesticks are observed. Any monthly close below trendline support this Fall, would most likely confirm a long term top in place.

Using the EWP, as long as the October 2007 major high remains intact, i'm still treating the advance from the March 2009 major low as a countertrend wave 2 structure of Primary degree, as part of a still active Bear market trend from 2000.

The Real Estate Market, here represented by the Dow Jones REIT Index could be in the process of forming a major Double Top pattern from 2007, with July's close found near the 2007 high level. The clear RSI-25 bearish divergence, shows that the advance from 2009 is not a sound one. Correctly interpreted Double Top patterns can be quite bearish in nature, so any failure to overcome the 2007 high, followed up with a monthly close below trendline support this Fall, would increase the odds of a major Real Estate top in place.

TYX monthly once again closed near important trendline support, coming in from 2008. Given the "bullish" divergence in RSI-25, i doubt Yields will fall below this key support. Instead, chances are greater for higher interest rates coming, with first resistance around the 30 level for the August trading month.

The USD is still trading within a long term bullish channel, developing from the 2011 low. July's high was caused by a trendline drawn through the monthly Closing highs made in 2005, 2008 and 2010. It closed for the month at the key 62% Fib. level, calculated from the 2010 - 2011 decline. RSI-25 has yet to reach overbought levels.

As for Gold the bearish channel is still intact after the July trading month. So the overall trend for Gold is still negative at this point, with plenty of room left in the RSI-25, before reaching an oversold condition, long term.

The Light Crude Oil market climbed higher, along with the stock market in July. June's Hammer candlestick formation at strong trendline support, was a classic reversal warning. But July's close came far from it's high, so this market needs to push through this high, to show it intend to go for a test of trendline resistance, around the 100 level.

Short term, the S&P 500 is climbing higher in a series of overlapping zig-zag waves from the June low, with Momentum and Breadth waning in the face of this advance. The soon overbought RSI-2 is also tracing out a bearish divergence vs. new highs in prices. Clear divergences are also observed in the New High - New Low Index and the NYSE Summation Index reflecting underlying weakness.

From a DGL (Dynamic Gann Level) angle, it's interesting to see how the market has followed the L1 line higher and should once again become a stiff resistance point Monday.

The S&P 500 also first needs to overcome strong trendline resistance it met Friday, so if it fails to overcome this zone on a closing basis Monday, it would be vulnerable to fall back for support. If overcome, then a test of the April high (1422.38) is the next likely event to look for. A break of that high, would exclude the currently preferred wave 2 scenario from the list of valid counts and a revision would be forced at that point.

From a VIX (Volatility) point of view, it could reach strong support Monday or Tuesday. If it fails to hold, then it could go for a test of the important March low.

Next week the S&P 500 market is entering the 2 week time window of the weekly 08/13 Gann Angle (+/- 1 week). So given the clear positive trend from the June low going into this GA, a reversal of larger than short term degree could be due soon, as weekly based GA's tend to locate the Intermediate/Long term reversals in the market but not always.

This GA marks 45 trading weeks from the Oct. 2011 bottom, 135 TW from the Jan. 2010 high and 180 TW from the March 2009 major low. So it's an important GA cycle convergence, which could mark the start of a powerful wave 3 Impulse to the downside, a valid view as long as the April high stays intact.

S&P 100 BPI (Bullish Percent Index) daily Sentiment is updated.

The 20Y T-Bond etf TLT weekly broke out from the earlier discussed consolidation pattern to the upside and once again tested major trendline resistance, in the vacation month. But another failure to overcome it, resulted in a pull-back in the last two weeks. First Fib. support is down at 123.2. This trading week was an Inside Week, (traded within the high&low of the previous week) reflecting indecision among Bond investors. A downside breakout from this indecision, could lead to a test of the first Fib. support level.

The Neural Net System (Re-trained 08/03) is currently Short on the OEX weekly.

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.

06/29
With another trading month just ended, a look at the S&P 100 monthly chart, shows that the market reacted up from important trendline support in June, keeping the positive long term trend intact. The Close near the high, suggest more upside potential in July, at least intra-month.

Either a positive or negative breakout should occur before the Apex of the two converging trendlines is reached. Any positive breakout going beyond the Oct. 2007 high, would negate the Primary degree wave 2 scenario. Any clear monthly close below trendline support, would indicate the market tide is turning bearish, confirmed by a monthly MACD crossover.

From a VIX monthly (Volatility) point of view, the Close came near the low but has yet to reach major trendline support, which should help for a further stock market advance in the first week of July.

The TYX (30-Year T-Bond Yield) tested the 2008 low in June. The full five wave structure from the 2011 high, the long term Double Bottom pattern and the RSI-25 bullish divergence, portend higher interest rates ahead. So this technical setup, would probably flash an alert for Bond investors positioned on the Long side.

The Real Estate market, using the Dow REIT Index monthly as a proxy, is possibly forming a major Double Top pattern soon, which often is a strong technical signal, in this case for the long term. This bearish view is supported by the weaker RSI-25 readings, compared to the 2007 market top. Although prices have yet to fully reach that peak, i doubt RSI-25 can climb above it's 2007 high, with a test of the high in prices. Any clear monthly close below trendline support later this year, would signal a change in the long term trend.

As for the USD Index monthly, the buck is still trading within a long term bullish channel but reached the key Fib. resistance area in May, so it has pulled back since then. The overall positive trend would only be threatened by a break below channel support.

The bearish long term stance on Gold remains intact as long as it trades below trendline resistance.

Short term, using the EWP the wave c part of an a-b-c corrective wave 2 of Minor degree is working it's way higher, as seen on this S&P 500 daily chart.

The next bearish reversal in the NYSE Summation Index (which currently is in a firm uptrend) would increase the odds of a wave 2 top in place. If the wave 2 tops out next week, (ideally up against channel or trendline resistance) the termination would still occur more or less within the time window of the weekly 06/22 Gann Angle cycle, mentioned in the previous update.

Excerpt: ..."There is also an important weekly based GA due 06/22 (+/- 1 week), which was mentioned in the Market Outlook 2012 Report (link above). This one marks 180 trading weeks from the March 2009 major low. So from a mid & long term point of view, the market is actually now within a time window of marking a top of higher than short term degree, which fits with the wave 2 scenario outlined below."...

The next daily (short term) based GA is coming up on 08/09, +/- 1 day. It marks 90 Trading Days from the April high and roughly 180 TD from the Nov. 2011 low. It will be interesting to observe the short term directional trend going into that GA, a powerful cycle convergence.

RSI-2 is about to enter an overbought extreme, reflecting the very near term situation. So this is another technical sign that a pull-back could start from one of the resistance zones (1380 or 1400 area) mentioned above.

From a DGL (Dynamic Gann Level) point of view, 1380 would roughly represent the L1 resistance. Any daily close above it, would open up for further strength towards the L2 level. Daily RSI-25 has plenty of room left before getting overbought, while weekly Stochastic momentum has entered overbought territory.

Short term Volatility - VIX daily tested the earlier broken channel from below, before resuming it's overall trend lower. Support comes in around the 16 level. If it fails to hold, it could go for a test of the March low.

The 20Y T-Bond etf TLT weekly is in a consolidation phase, so waiting for a breakout from the 125 - 127.5 range it currently is stuck within. The directional breakout would set the tone for this market, for the weeks thereafter. A positive breakout would signal a test of major trendline resistance (132.5 area). A negative breakout, on the other hand, should result in a test of the 38% Fib. support area, (122.5) at a minimum.

S&P 100 BPI (Bullish Percent Index) daily Sentiment is updated.

The Neural Net System is Short on the OEX weekly and still Long on GLD (Gold etf weekly).

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.

06/15
The earlier discussed 06/06 (+/- 1 day) Gann Angle cycle convergence in the S&P 500 apparently had an impact on the market, causing an upside reversal. The next GA 06/20 (+/- 1 day) marks 180 trading days from the October 2011 important low. So if the current advance continues into this GA time window, it could mark a top or the start of a pull-back in the market.

There is also an important weekly based GA due 06/22 (+/- 1 week), which was mentioned in the Market Outlook 2012 Report (link above). This one marks 180 trading weeks from the March 2009 major low. So from a mid & long term point of view, the market is actually now within a time window of marking a top of higher than short term degree, which fits with the wave 2 scenario outlined below.

With the wave v of 1 termination at the 06/04 low, a three wave, a-b-c zig-zag corrective pattern is now working it's way higher from that low. This one should complete wave 2 (one degree higher) sooner or later.

A typical retracement for a wave 2, is the 50% - 62% Fib. zone (marked on the chart above) but can even retrace 100% of wave 1 and still remain a valid wave count, according to the EWP. Any break of the April high would force a revision of this currently preferred wave count.

If it really is a wave 2 developing, then once completed, a more serious decline could start thereafter, as a wave 3 is normally more powerful than a wave 1 (in this case from the April high) and should take prices well below the June low at some point.

Getting on the bandwagon of a sharp wave 3 (wave 3 and C are the sharpest ones in the EWP) is one of the best quick return trades one can make. Of course the brainy part is to locate them correctly, which is one of the aspects of the EWP which makes the trading life for many Elliotticians (myself included) so fascinating and challenging, in my opinion.

Any clear break (daily closing basis) of trendline support before the April high is reached, would increase the odds for the wave 3 scenario to work out. The same goes for a bearish reversal in the NYSE Summation Index indicator. A bearish divergence is observed in OEX daily momentum vs. new highs in prices. So the Bulls are losing steam it seams.

Speaking about Elliott Waves, EWI is out with a S&P 500 Intraday Service which can be tested out for free until 06/21.

Daily RSI-2 has yet to reach an overbought extreme though, (bearish div. also here) so the wave c of 2 could go for a test of the key 62% Fib. level, before making a pull-back. If this level is overcome at a later point, then the next likely targets for wave 2 could be the 79% retracement or even trendline resistance up around 1400.

Volatility - VIX daily is likely going for a test of channel support early next week. If it fails to hold (daily closing basis) it could open up for even lower volatility, (investor fear) which is usually positive for the stock market.

The 20Y T-Bond etf TLT weekly made a pull-back from the trendline mentioned in the previous update. First Fib. support is at 122.5.

S&P 100 BPI (Bullish Percent Index) daily Sentiment is updated.

The Neural Net System turned Long on the OEX weekly and is still Long on GLD (Gold etf weekly).

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.

06/01
The Dow closed down 6.2% after the May trading month. We have to go back 2 years to find a worse monthly performance. Other key markets like Commodities, Oil and Gold joined the stock market (deflationary pressure). Commodities fell 10.8%, while Oil collapsed 17.5% for the month. Light Crude weekly reached an important trendline this week. Any weekly reversal pattern formed here, would indicate a temporary bounce from this support area.

Apparently there was a flight to safety, as the yield on the 10-year U.S. T-notes fell to the lowest level in U.S. history, 1.53%.

Not surprisingly, the USD took the opposite route of the weak markets and was even able to overcome trendline resistance this week but is soon facing resistance produced by the price channel roof.

With the S&P 500 as a proxy, a five wave Impulse structure from the April high is likely coming to an end soon. If the price weakness continues into the 06/06 (+/- 1 day) Gann Angle in the S&P 500, then this is one likely time window to look for a termination of this five wave structure. This GA marks 45 Trading Days from the April high, 135 TD from the Nov. 2011 low and 180 TD from the Sept. 2011 high.

Using the Elliott Wave Principle this could be the first leg down of Intermediate degree, as part of a possible Primary degree wave 3 scenario underway from the April high. Longer term weakness is also indicated by the VIX monthly breakout from a Triangle pattern, indicating higher Volatility (investor fear) in the coming months.

Despite the stock market weakness in May, the OEX (S&P 100) monthly MACD has yet to turn bearish on the long term. But one more strong monthly down close could generate the next sell signal for the broad market. Also, any monthly close below trendline support, could open up for even more weakness thereafter.

Short term, the start of a corrective phase to the upside is looked for, early to mid next week. This view is supported by the soon oversold RSI-25 (chart above) and in the very near term, a bottoming RSI-2. In addition, the Put/Call Ratio is once again flashing an oversold market warning.

The 20Y T-Bond etf TLT weekly reached the trendline target mentioned in the previous update. Although an intra-week push above this strong resistance area is not ruled out next week, a pull-back thereafter is possible.

OEX BPI daily Sentiment

The Neural Net System is still Short on the OEX weekly and turned Long on GLD (Gold etf weekly).

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.

05/18
This week's trading came up with a good example of what is sometimes happening by using Connors common 2-RSI approach for entering the market, when it stays oversold longer than expected - a significant drawdown was the outcome. In the S&P 500, the 2-RSI became quite oversold on Monday 05/14, reaching the 5.50 level.

So by his rules we would enter the market at the Close for the day, in the expectation to see a Close above the daily 5 EMA within a week. But the sell-off continued all week and by Friday's Close the S&P 500 was roughly 46 points lower, compared to the entry level. Since Connors recommended no Stops (as he states it would hurt the performance over time) we would now sit in a position which is going through a sleep taking drawdown and we have no insurance against a further collapse.

Let's see what would happen if the intra-day strategy was used (introduced in the previous update, scroll down to see it). On the same Monday, a bottom is looked for, because of 2-RSI's oversold condition, so the S&P 500 15 minute chart is given more attention. The strategy involves taking advantage of a likely move going above the daily 5 EMA in the days thereafter, with the aim to take out 6 points profit chunks from the market.

As outlined in the previous update, a flat or rising 21 SMA is looked for in the 15 Min. chart and also a Close above the upper Bollinger Band. The Close should ideally be in the upper 35% part of the candlestick's range. Finally, before entry can be done, the high of that candlestick should be broken by the next candlestick.

As the chart shows, at 15:45pm (MT4 platform time) a trading opportunity shows up and a Long entry is made on the next candlestick. But it's a fake breakout, so stopped out for a 3 point loss. Next opportunity comes 05/15, 02:45. Long entry is made on the next candlestick, Stop Loss is 3 points. Target is 6 points higher, so a 1:2 Risk/Reward trade. Target is reached 07:30. The bottom line so far shows +3 points. The next trade is made at 16:00 on the same day, with a 3 point loss. Total: 0

The next trade is entered 05/16, 09:00 for a 3 point loss. Total: -3
Re-entry is done a bit later, at 10:30, a winner. Total: +3
Next trade is entered 14:00, a loser. Total: 0
Next trade is on 05/17, 00:15 another loser. Total: -3
The most recent trade was entered 05/18, 07:45 for a positive result. Total: +3

So by the end of the week, this strategy would be up roughly +3 points, within a tough market environment (but with some sleep intact) compared to the so far -46 points drawdown in the daily version. And we're ready to bank better profits once the market finally turns up.

The backside of the intra-day version though, is that the trader would be more tied to the computer, so it's best suited for day traders it seems. However, since it's not often 2-RSI stays so oversold like this, it normally takes a shorter time to locate a bottom the intra-day way, in the aim to trade the next upswing.

As an example, let's see how trading the 05/04 2-RSI S&P 500 oversold condition would work out. In an attempt to locate the bottom, a trade was entered 01:45 MT4 platform time. A re-entry was done 10:45 after being stopped out on the first one. But this one was a loser as well, so the Total so far: -6 points.

The market apparently was still very weak, so the next opportunity didn't show up before over the weekend, on Monday 05/07. At 07:00 the next entry was possible and the real bottom was located, giving a 6 points profit on this trade and another 6 points from a trade entered at 12:15, since the market still was over a trade away from the daily 5 EMA at that point. Total result: + 6 points. The market headed south again thereafter.

Well, enough rambling about this, now back to the ordinary analysis.

Volatility, (investor fear) VIX is quickly gaining ground, after it broke above trendline resistance a week ago. But it's RSI 25 has yet to enter "overbought" territory.

From an Elliott Wave Principle point of view, the market could be working on the wave iii part of a five wave Impulse structure to the downside. In this scenario, it's assumed that a larger top was made in April. The alternate count, on the other hand, interpreted as an a-b-c zig-zag correction, suggests there is more to come to the upside, once this pattern is completed.

The current Put/Call Ratio readings reflects a very oversold market, while the NYSE Summation Index shows a firm downtrend.

From the previous update:

..."06/20, 2012 (+/- 1 day) seems to be an interesting time frame in the stock market, which marks 180 trading days from the important October 2011 low. So this is the next Gann Angle cycle worth keeping an eye on for a potential market reversal. This daily GA also happens to coincide with the weekly based 06/22 Gann Angle which marks 180 trading weeks from the March 2009 major low. So the directional short/mid term going into that time frame, would point to a reversal in the opposite direction."...

The GLD Weekly (Gold etf) has established a bearish price channel, after it tested the earlier broken positive channel from below. So as long as this etf trades within this channel, the outlook seems negative for gold.

As expected, the Dollar pushed higher in the face of the market sell-off but has reached trendline resistance. So a short term pull-back is not ruled out in the buck. Long term, it's climbing higher within a bullish channel from the 2011 lows, better seen on this updated monthly chart. Key Fib. resistance is up at 82.5, while major trendline resistance is around the 87 level. Monthly RSI 25 shows there is good room left, before the USD is getting overbought.

The 20Y T-Bond etf TLT weekly seems to be in a blow-off phase and at the same time tracing out a RSI-25 bearish divergence vs. new highs in prices. A likely target is the larger trendline resistance drawn on the chart.

Updated OEX BPI daily Sentiment

The Neural Net System is still Short on the OEX weekly and Short on GLD (Gold etf weekly).

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.

05/04
Friday's sell-off forced the 2-RSI to a very oversold condition, (in this case represented by Metatrader S&P 500 charts) so i'll be looking for a market reversal early next week.

To reduce the chance of too early entries and the magnitude of losses, one possible way to avoid those times when this daily 2-RSI indicator stays oversold a few more days than expected, is to zoom into a 15 minute chart and wait for the 21 SMA (simple moving average) to turn flat or up and thereafter look for a 15 min. Close at or above the upper Bollinger Band (the BB is set to 9 period, Deviations 1 and Apply to Close).

The 15 min. Close must be near it's high or at a minimum, in the upper 35% of the candle range. I then wait for the next candle to break above the previous candle high, before entry. A Stop Loss of 3 points is used.

This strategy helps me to fine tune when the bottom really is in place and milk the market for a minimum 6 S&P 500 points, riding the next upswing. Given the 3 points Stop, this gives a 1:2 Risk/Reward ratio. So even if i'm correct only 50% of the time on the entries, this strategy could still make some money. I'm still experimenting with various Stop Loss/Targets, i.e. 2.5/5 etc. But overall, this strategy looks promising, although it would take a deeper back/forward test to see if it's profitable over time.

But think about it, when the market trades above the 200 daily EMA, Connors state you have a better edge in trading, (compared to the traditional RSI 14 setting) by using a 2-RSI oversold extreme (the more below the 10 level, the better) and exit at a daily close above the 5 EMA or 2-RSI 65 level. By implementing this 15 Min. strategy, i'm trying to reduce big drawdowns, (as Connors recommended no Stops at all for his daily 2-RSI strategy) but still take advantage of the edge it gives.

Since the current market has yet to bottom out, let me show an earlier example of this strategy in use, in this case from the latest 04/23 low in the S&P 500. The daily 2-RSI fell below the 5 level on a daily closing basis, an oversold extreme reading.

At this point, we know from Connors research that the chances are good that the S&P should close above it's daily 5 EMA at some point, within a week. So we dive into the 15 Min. time frame to look for further clues of a bottoming market, in the near term. At 18:15 pm (Ava MT4 platform time) a convincing 15 Min. Close above the upper BB is observed and the candle also closes within the upper 35% of it's range. The 21 SMA is checked, it should be flat or rising. The next candle breaks the 18:15 high, entry criteria is fulfilled. Stop Loss: 3 points. Target: 6 points from entry. Target is reached 04/24, at 08:15 am.

Volatility, VIX is probably going for a test of the upper Triangle line early next week, so given Friday's S&P closes near the lows, some more weakness is looked for, at the start of the week. Any daily close above the VIX resistance however, could lead to even more weakness in the stock market, short term.

From an Elliott Wave Principle point of view, the leg down from the April high could be the wave i of a new five wave Impulse structure to the downside. The brief rebound high made in early May could then be the wave a of an upside a-b-c corrective phase of the Flat type. So currently the OEX could be working on the b part of this scenario.

An alternate count, is to label the first leg down from the April high as wave a, as part of an ongoing a-b-c correction to the downside.

06/20, 2012 (+/- 1 day) seems to be an interesting time frame in the stock market, which marks 180 trading days from the important October 2011 low. So this is the next Gann Angle cycle worth keeping an eye on for a potential market reversal. This daily GA also happens to coincide with the weekly based 06/22 Gann Angle which marks 180 trading weeks from the March 2009 major low. So the directional short/mid term going into that time frame, would point to a reversal in the opposite direction.

Updated BPI Sentiment and 20Y T-Bond etf TLT weekly charts. TLT closed for the week up against trendline resistance. It needs to overcome this zone, to open up for even higher prices.

The Neural Net System turned Short on the OEX weekly and Short on GLD (Gold etf weekly).

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.

04/30
Monthly charts and some daily & weekly charts are now updated.

Monthly momentum in the broad market, especially in the Dow is getting quite overbought, with monthly prices at the same time near stiff trendline resistance.

Volatility - VIX monthly closed for the second month in a row near strong trendline support. Given it's position near the Apex of two converging trendlines, either an upside or downside breakout could be the outcome soon. I.e. an upside breakout could put pressure on the stock market, longer term.

Worth noting is also the strong bearish RSI 25 divergence developing in the OEX weekly which is an alert of what is in store for the market.

Updated BPI Sentiment and 20Y T-Bond etf TLT weekly charts.

The Neural Net System is Long the OEX weekly and Long on GLD (Gold etf weekly).

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.

03/16
The price structure from the November 2011 OEX low is either an a-b-c or five wave pattern in a mature stage. By taking a step back to look at the bigger picture, the OEX monthly chart shows that the market is getting close to a larger trendline, drawn through the major 2000 and 2007 tops, a fairly stiff resistance area.

On the weekly chart a snap-back move has brought prices back up to the old trendline it broke below in mid 2011. This should also be a tremendous resistance area. On the same chart, weekly RSI 25 is tracing out a bearish divergence vs. the new high in this index.

Given the overbought extreme in Sentiment and also bearish divergences observed in i.e. the New High - New Low Index and NYSE Summation Index i doubt the monthly trendline is overcome on the first attempt but rather price weakness from this area is more likely.

The NYSE TRIN indicator has dipped to levels not seen in over a year. The Put/Call Ratio has also now fallen to levels where short term tops were formed in the past but has yet to reach an extreme reading, like the one seen at the April 2010 top in the market.

Friday's Volume was the biggest since Dec. 2011, with prices at the same time showing no progress. So this could mean some distribution is going on and possibly a top being formed, although a last intra-week push to the monthly trendline is not ruled out. This Volume chart also shows daily prices have reached a trendline coming in from Feb. 2011.

Regardless of where the final top tick comes, any Close below the bullish channel on the daily chart would most likely confirm a more significant top in place, a more conservative entry.

To come up with likely time targets for a top, a larger Bradley turn is due now (03/16).

Another candidate is the next Gann Angle cycle convergence due 03/21, +/- 1 day. In case the positive trend continues into that time window, it could mark a top in the market. On the other hand, if prices falls sharply into this GA, it could instead mark the start of a reaction to the upside.

The 20Y T-Bond etf TLT weekly broke out from the Triangle to the downside and closed for the week near the first Fib. support. RSI 25 has plenty of room left before getting oversold, so a test of this Fib. area is a minimum downside probability.

The Neural Net System is currently Long the OEX weekly and Long on GLD (Gold etf weekly) and Short SLV (Silver etf).

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.

03/02
The persistent positive trend from the Dec. 2011 low seems intact after this trading week. But the high for the week came up against the strong 8/8th MML (Murrey Math Line) target mentioned in the previous update, so the market could be due for some weakness.

The OEX has also come close to the major L3 DGL.

The NYSE Summation Index continues to deteriorate in the face of this advance.

Sentiment, BPI - Bullish Percent Index has reached strong trendline resistance.

The 20Y T-Bond etf TLT weekly has built a small Triangle pattern. The directional breakout from it, could set the tone for this market thereafter. I.e. an upside breakout would indicate a test of the 2011 high coming, while a downside breakout would indicate a re-test of the first Fib. support.

The Neural Net System is currently Long the OEX weekly and Short on GLD (Gold etf weekly) and Long SLV (Silver etf).

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.

02/17
The Primary wave 3 scenario reached its negation point this week, as the Intermediate degree wave (2) of this structure climbed above the May 2011 high. According to the Elliott Wave Principle wave two's in general can't retrace more than 100% of wave one, to remain a valid count.

So a revision of the wave count suggest a possible Primary wave 2 (labeled w-x-y) still working it's way higher from the March 2009 low. As long as the October 2007 high remains intact, a Primary wave 2 scenario from the March 2009 low can't be ignored.

Sentiment, like the BPI - Bullish Percent Index continues to show extreme readings and is close to strong trendline resistance.

While the market is pushing to new highs, bearish divergences in several Momentum and Breadth indicators are observed. I.e. the Stochastic and McClellan and RSI 25 indicators shows this pattern. When daily RSI 25 is in overbought territory, (like it is now) more significant tops tend to form.

NYSE Summation Index has entered bearish mode, despite the move to new highs. The New High - New Low Index is also tracing out a bearish divergence these days.

Possible targets for this advance could be the strong 8/8th MML (Murrey Math Line) at 625 or even the major L3 DGL around the 630 level. Any market trend, in any time frame, wants to reach the key DGL (L3) 60-70% of the time, before reversing.

A look at the Gold market, here reflected by the GLD weekly (Gold etf) shows a snap-back move towards the earlier broken channel. This is a classic pattern often seen before heading lower again and gives a good trading opportunity. Let's see if this will happen in this case too. Any clear weekly close into the channel again, will most likley negate this pattern though.

The 20Y T-Bond etf TLT weekly is apparently in a consolidation phase, with a slightly downward bias. Any break of the low made 2 weeks ago, would indicate more weakness coming, towards the first Fib. support.

The Neural Net System is currently Long the OEX weekly and still Short on GLD (Gold etf weekly) and Short SLV (Silver etf).

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.

02/03
The OEX market is 4 points away from forcing a revision of the current preferred wave count, the Intermediate degree wave (2) from the Oct. 2011 low. Wave two's in general can't retrace more than 100% of wave one, to still remain a valid count, according to the Elliott Wave Principle.

With the market climbing even higher this week, Sentiment has reached extreme levels and the VIX (Volatility) has come all the way down to support produced by the Spring & Summer 2011 lows and the lower wedge line as well, with it's RSI 25 dipping to new lows in oversold territory.

The persistent price trend from the Dec. low is also reflected in the clean NYSE Summation Index trend. As mentioned earlier, the next 3 EMA crossover would increase the odds of a top in place.

With another trading month ended, a look at the OEX monthly chart shows a still intact MACD bearish signal but just barely so. The market closed up against trendline resistance and it also soon face resistance from the old wedge pattern, if it decides to continue higher in February.

Dow Transport monthly is soon running into stiff resistance, with long term momentum at the same time possibly tracing out a bearish divergence.

The 20Y T-Bond etf TLT weekly closed near the pivot low this week, so if this low is broken next week, it could open up for more weakness in the bond market, towards first Fib. support.

All the NN models have been re-trained & optimized. So the Neural Net system is currently Short the OEX weekly and Short on GLD (Gold etf) and Short on SLV (Silver etf).

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.

01/27
The positive trend from the December 2011 low apparently ignored the 01/17 Gann Angle cycle and the OEX high for the week touched a weekly trendline drawn through the August 2011 low and October 2011 high. After the end of the trading week a Doji (reversal) formation is observed, which also resulted in a weekly Cycle10 reversal, at overbought levels.

The firm NYSE Summation Index trend has catched most of the price move from the Dec. 2011 low. Any break of the weekly Doji low and close below trendline support and a crossover of the NYSE Summ. 3 EMA, would be stronger evidence of a peak forming in the market. The same goes for an upside breakout from the falling wedge pattern in the VIX (Volatility) daily chart.

Sentiment, here reflected by the BPI - Bullish Percent Index continues to show very overbought readings.

As long as the May 2011 high is not violated, the Intermediate degree wave (2) from the Oct. 2011 low still remains a valid count. So the market is at an interesting and critical stage, for this scenario to work out. The next few trading weeks will probably give the answer. As many Elliotticians knows, in general, wave three's of Impulse structures are the most sharp ones and one of the favorites among wave traders, because of their potential good returns.

The USD Daily prices recently broke out from the bullish channel mentioned in the previous update and closed below first Fib. support and near the low Friday. So more near term weakness is not ruled out for the buck.

The 20Y T-Bond etf TLT weekly fell below Triangle support a week ago and is now testing this pattern (resistance) from below. Any break below this week's pivot low, would indicate more weakness coming, towards first Fib. support, which has been tested before.

The Neural Net system is still Long on the OEX weekly and Long on GLD (Gold etf) after this trading week. The NN model for SLV (Silver etf) weekly is re-trained and optimized and is currently Long on this market.

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.

01/13
The short term positive trend is apparently intact, entering the 01/17 (+/- 1 day) Gann Angle cycle convergence early next week, as written about in the Outlook 2012 Report. Excerpt:

..."Short term, the next daily based Gann Angle Cycle comes up in just over a week on 01/17, +/- 1 day. If the current short term positive trend continues or consolidates into that time window, it may mark a top in the market. Any sharp sell-off into it, on the other hand, could mean a positive reversal around that time. This GA marks roughly 90 trading days from the August 2011 rebound high and more important, 180 TD from the May 2011 larger high."...

So i'm looking for a downside Wedge breakout next week, to get more evidence of a short term top in place. If the lower wedge line holds and a reversal takes the market beyond the upper wedge line thereafter, then my view about this GA is wrong and also the wedge pattern itself, if the advance continues after 01/18 (through the +/- 1 day time window).

Technically, my bearish stance is supported by weekly prices now reached trendline resistance and with Cycle10 at the same time found at levels it would normally make a bearish reversal (its actually still tracing out a bearish divergence). On the daily DGL chart, the L2 line is also touched.

And its also supported by several bearish divergences observed in Stochastic momentum, New High - New Low Index and the NYSE Summation Index. In addition, the NYSE TRIN shows overbought readings.

Any clear daily close above the upper wedge line on the VIX Daily chart, would be an even harder technical signal to Short the stock market, in my opinion.

Sentiment is also at quite overbought readings, here reflected by the Bullish Percent Index daily, currently struggling with several trendline resistance challenges.

With the latest news about the S&P downgrades of most of the EU countries, (and especially France) i would be surprised to see the market responding with higher prices in the coming week(s).

The USD Daily is in a firm uptrend from the Oct. 2011 low. Any downside breakout from the bullish price channel, would most likely confirm the next short/mid term top in the buck.

In the 20Y T-Bond etf TLT weekly i'm still waiting for it to set the directional tone, (downside breakout expected) by either a positive or negative breakout signal, from the minor Triangle pattern developing these days.

The Neural Net system is still Long on the OEX weekly and Long on GLD (Gold etf) after this trading week. GLD NN model re-trained & optimized 01/27.

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.

01/06
The weekly trend chart gives some mixed readings but the important 13 - 34 EMA part is still barely in bearish mode, despite the S&P 500 price advance from the Fall 2011 low.

The daily NYSE Summation index shows a firm positive trend underway from the Dec. 2011 low but is likely tracing out a bearish divergence these days. I'm using a 3 day EMA on it, to better see the true trend in prices. Any divergences observed in this indicator, (like now) often warns about tops/bottoms forming and possibly a stronger move in the opposite direction thereafter.

On the weekly chart, the OEX has met some trendline resistance challenges it needs to overcome first, if it decides to go for a test of the May 2011 high, mid term. With the weekly Cycle10 now well into sell territory and showing divergence weakness compared to higher highs in prices, one of these trendlines could cause a reversal or at least lead to a pull-back in prices. So the market is at an interesting juncture. If it falls below trendline support in the coming weeks, the odds of an Intermediate degree wave (2) top in place, would increase.

Using weekly closing prices only, also here the market has to overcome strong trendline resistance (585 area) first, to open up for even higher prices thereafter, towards the May 2011 high.

To zoom into the finer wave structure of the market, a look at the daily chart shows a series of a-b-c wave patterns developing from the Oct. 2011 low, an overall w-x-y pattern which may terminate the Intermediate degree wave (2) soon. The 01/17 GA mentioned above is one ideal candidate to produce a top, in case the positive trend continues or a consolidation into the GA occurs.

But daily Cycle10 has already started a new downside pressure phase, so only time can tell for sure if this will take the form of a pull-back only, towards lower wedge line support, before heading higher again. Or that the market its going for a wedge breakout. Any daily close below the lower wedge line, would increase the chances of an already completed wave (2) at that point.

Volatility (fear level)
The short term VIX daily shows a possible Falling Wedge formation. An upside breakout is looked for, given the bottoming RSI 25 these days. If it breaks to the upside sooner or later, once again a Volatility explosion could be the outcome, in line with what is expected from the upcoming Intermediate degree wave (3) impulse to the downside.

Dynamic Gann Levels - DGL
Prices are currently near a larger L2 DGL which has caused a significant short term top in the past and it could do it again. A mild bearish divergence is observed in RSI 25 versus the slightly new highs in prices. RSI 25 at more or less current levels in the recent past, shows several top formations.

Murrey Math Lines
The MM chart shows a momentum bearish divergence, with the market at the same time struggling to get out of the 3/8 - 5/8th MML range, a well known fact in this theory. Once inside (entry difficult) it is also difficult to get out of this range

In retrospect, the major 4/8th MML was partly the cause of the wave (1) bottom in Oct. 2011, as seen on this longer term MM chart.

Individual Stocks
The popular Google stock has once again met major Triangle line resistance and is at the same time tracing out a bearish RSI 25 divergence vs. the larger 2009 top in prices. A mid/long term decline is in the cards for this stock.

Waiting for a clear breakdown in the 20Y T-Bond etf TLT weekly as the RSI 25 bearish divergence indicate weakness coming soon.

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

Below is also a S&P 500 Neural Net peek into the 3 first months of 2012, 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.

Good luck trading in 2012!