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Saturday, August 6, 2011

$SPX - Week Ahead - Extreme Volatility Likely

A sharp bounce early in the week is likely due to extremely oversold conditions.  Most importantly in the time cycles, August 9-10th are the days to watch closely for a large selloff capitulation.     
Most market participants have failed to consider the consequences of a massive short squeeze.  The wall of worry has been re-established.  More like a Mount Everest of worry.  These sentiments are extremely bullish.

The short squeeze of the century starts this week.  Mark my words: Bet on P3 decline here and the market will take everything you have.  The next major target is SPX 1385+ with new all time highs anticipated.  And then.........

I cannot stress enough - please use caution bears in the upcoming week.  Massive Bear Trap has been set.

The correction is nearly over with the current bull market (bubble) to continue.

30min Chart















SPY found major support Friday on several important trendlines, and fibonacci fan support.  All of which intersect and acted as a "magnet".   

2day Chart

106 comments:

  1. Forget about the downgrade. Rating agencies are a joke. They didn't see the problems in 2008, they are simply clueless. The market is the king and makes the decisions - not the rating agencies or anyone else.

    Look at how the Japanese have tried to supress the Yen. It hasn't worked. So why would we think that S&P rating agency will have any impact other than a short term gyration?

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  2. Let me see if I got this right...............?

    Monday we rally to 1260

    We then tank into the 9th-10th to 1150

    We then move to new highs (no timeline)

    Correct?

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  3. My 2 cents.............

    We back and fill the 1168 low of friday (maybe lower) Monday and Tuesday.

    Rally of some sort begins on Wed.

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  4. Yes, what you said above is basically what I am looking at.

    We have to rally first in my opinion because I see Major weak cycle lows Aug 9-10. That should be where the selling is concentrated the most.

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  5. I have a different take as stated above.

    Weakness into Tuesday then a rally...........the strength of which will be telling.

    One of us maybe right lol!

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  6. Not sure how your cycles work and I respect your work very much.

    That said I see you were looking for a rally from 1263 to 1300ish and instead we tanked to 1168.

    Just curious as to why it didn't work and why it will now that the tide has shifted?

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  7. My timing was always right to expect selling pressure approaching Aug 10th so I am pleased with my time cycle work. I am confident that it is correct.

    I certainly did underestimate how far price would travel. One of my weaknesses is that I am often early at the turns. The fact is that I can draw the charts a lot faster than the mkt takes to move.

    I see the current mkt stretched like an elastic band. Very dangerous short squeeze setup imo.

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  8. sc,
    with the s/p downgrade, do u think gold will rocket up or is already priced in?. thanks

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  9. Understood and thanks.

    Think it might be early for a rally here too but we shall see.

    What is the timeline for new highs according to your cycle work?

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  10. I have to look at the metals further. For this week I may just stick to S&P for my own trading.

    The play is going to be huge on the metals, but I may watch closely first and let the dust settle, before I step into them.

    I need to do some more work on the timing for a rally top.

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  11. SC,

    Based on cycle, is your bounce after the Aug 9/10 low all the way to about 1300 just a bounce, albeit a strong squeeze, or a true reversal that may take us higher, or even new high?

    Or you cycle has not covered that far yet?

    In wave terms (I am not an export), bounce to 1260 is minuette 4, then sell off into Aug 9/10 is minuette 5, which completed minute 1 of minor 3 down. The bounce will minute 2. All the way to 1300 is way too strong, as it seems (0.764), though not out of question.

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  12. SC - any chance you can put up a chart of your longer-term charts for the S&P500?

    It looks to me that the 'damage' from the last few weeks have to result in a bear market, no 'healthy' bull market should be doing this, particularly this late in the bull cycle.

    I still think we are in a secular bull, but we are entering the next bear, the top should be in at 1,371 - but as you mentioned, you believe the current top will be bettered.

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  13. OK. Saw your comment that we will make new high after the Aug 9/10 low.

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  14. These are my thoughts. Back test of the 2oo MA possible set around 1280 ES but rallies will be sold off quickly.

    http://www.screencast.com/users/katzo7/folders/Jing/media/cfea842c-2b48-4eec-a830-f7e40798cd72

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  15. I don't see as high as 1280 ES tho, I think rallies will be sold off quickly. Action will be very erratic.

    http://www.screencast.com/users/katzo7/folders/Jing/media/64ee2c91-7a55-4bbe-8f8d-4150aec390de

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  16. nice charts ! this supports the idea of a bounce though I find it hard not to imagine a weak open Monday on the S&P news...just dont think it will last http://chartramblings.blogspot.com/2011/08/spy-17-point-ranges.html

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  17. http://1.bp.blogspot.com/-sTLvh6s3Fyc/TjkShBkZK4I/AAAAAAAAGLQ/Kpmri4EM5xU/s1600/ftse.gif

    Ftse100 Mirror chart

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  18. Can't wait to see your PM thots

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  19. George, I hesitate to even say this because I realize it is hard to believe at the moment, but I think this unprecedented bubble market will approach near the all time high 1575 SPX in coming months.

    Michael, this is not a healthy market, it is rather a very scary and powerful bubble. The last freakish bull act is about to kick off.

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  20. SC,

    Been poring over all my charts over all time frames.

    Sticking with weakness into tuesday close (maybe just back and fill unless we tank) but if i squint I can see a very small possibility of up on Monday but it is a stretch.

    We would have to be off mildly in the a.m. and then rally right away and one of my fast indicators is about to trigger but all in all I am just not seeing what is on your charts.

    Wish you luck with it however and am keeping an open mind.

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  21. SC is certainly right about the S&P downgrade. It means nothing. This is the same ratings agency that rated mortgage backed securities AAA back in 2007-08 - and we all know what has happened to the real estate market since, because sub-prime was bundled together with those so-called AAA securities.. The US cannot ever default on its debt because it has the ability to print its way out.

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  22. Deja Vu:

    The current action takes me back to memories of the March 09 low. I remember BAC trading around $2.50. I called the trader who handles my orders to buy BAC. He has been in business for 30 years. He says: "gee you realize that cnbc is saying that the banks may be nationalized tomorrow with the shareholders losing everything." Yes I am aware of that I say. I tell him the chart says $13-15. There is nothing but dead silence on the other end of the phone.

    BAC continues to drop. I tell him to buy BAC at the market price. He cringes. Big block of BAC bought at $2.27. Ok great I say.

    Mintues later BAC trades to $1.89. He says "Citi just broke a buck, it is a penny stock now". The trader is cursing. I tell him I feel a little queasy as a tingle goes up my spine, and my heart starts to beat like crazy.

    Three days later I sell my BAC at $5.34. I feel just fantastic until soon after BAC is trading near $10. What was I thinking selling out at $5 I say to myself when the chart said $13-15.

    So what is the moral to this story?

    First of all nothing against my trader. He was hearing clients panic all day. Even if you try to tune this out it seeps into your subconscious.

    Let the market tell the story. Trade the charts. Yes I know - easier said than done.

    "there is nothing to fear, but fear itself"

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  23. I was expecting to test Friday's low. Futures dropped below that.

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  24. SC,

    Futures back up my call but I will give it to the cash open to collect my lobster. :-)

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  25. SC, are you seeing the same bottom now as you saw it in '09?

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  26. It's not the same type of bottom technically, but I do see it being a major bottom.

    That brings up another point about bottoms. Let's look at major bottoms this year. We have the March 16th V bottom. We have the June 16th triple bottom.

    What I have proposed now is a double bottom. The mkt "likes" to alternate and switch things up with different types of bottoms.

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  27. Please give some construct to the new high call. Expanding megaphone? You reading McHugh? You following 1970's bear market pattern?

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  28. SC,

    You are forecasting a violent move this week. We may open at 1170, then we bounce sharply to 1250/60, scaring all the bears, then dive hard to 1150, making sure bulls losing all hope, all in 3 days, Aug 9/10.

    3 days.

    There we set up a base to rally all the way to new high, maybe in a matter of weeks.

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  29. Hook - Thanks, I will do that. This is the McHugh link.

    http://www.safehaven.com/article/21644/abysmal-june-employment-figures-warn-of-trouble-ahead

    I haven't been following the 1970's pattern. Do you have a link? I'd be interested in having a look. Thanks.

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  30. It should be an exciting week George!

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  31. SC, with such a violent move up in the stock market where do you see dollar go? because if goes south, i do not see how metals can have any significant sell off.. Do you think dollar and metals both take a deep dive? This certainly would be a big surprise to many... is it realistic though.

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  32. Hi SC

    The current future of S&P is at 1168.0...that is almost 100 points away from SC target. I dont know, kind of feel like that trader right now that handle your call back in the 09 days. cursing soon lol

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  33. Silver market update from Clive Maund, seems a topping and then plunge warning for silver now. Any view update on Silver, SC? Thanks.

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  34. FYI. Links of Clive Maund are here:
    Silver: http://www.clivemaund.com/article.php?art_id=67
    Gold: http://www.clivemaund.com/article.php?art_id=68

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  35. I'll have comments on the currencies soon, agree with Clive about Silver decline, and I like his chart. His reasoning is wrong though. He says Silver drops with the stock market crashing similar to 2008.

    My view is that Silver/Gold decline with the stock mkt surging up. What use is a safe haven with a rallying stock market?

    Silver up today, and I think it has more to go before topping.

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  36. I remember xtrends once said that while the Fed can't stop the inevitable market decline, they have a couple options of how to get there: 1) crash the market, which would spark a rally and delay the process again or 2) a slow methodical decline without a sharp rally. It looks like option 1 is being played out.

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  37. The short squeeze setup is going to be powerful. The current S&P chart is outrageously bullish.

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  38. I like 1263-74 SPX best, but it may be a good idea to start using caution at 1258.

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  39. Have to say I respect the way you stick to your guns.

    And this is by the 10th?

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  40. It is moving the other direction now...

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  41. 1150 on the way and 1260 by tomorrow.................wow.

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  42. still going downward 1157.22, -41.73 point so far.

    questiona anyone buying any canadian bank stock at the moment? if yes, which bank stock looks good to buy now?

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  43. With all the probability, a 120+ points bounce isn't likely. The bounce will be sold quickly.

    The only possibility is direct mentioning of QE3 in tomorrow's FOMC announcement.

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  44. TD is one of the strongest both fundamentally and technically

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  45. Have to agree with George H.

    Bounce will be sold hard so 100 plus rally does not seem likely.

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  46. looks like it going back up a little. 1159.6

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  47. 1145-50 holding so far..........if it breaks we go to 1105.

    All my charts are pointing down with 0 buy signals.

    I will wait for at least 2 to turn up before playing a bounce as the selling pressure is enormous. Even a good sized short squeeze won't get much.

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  48. 1147 SPX bottom measured move of H&S

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  49. Still holding to my call of weakness into tomorrow and wed we rally...........from what level and how strong is the question.

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  50. SC do still think we will get to 1260 tomorrow?

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  51. SC...............if that happens I will have to bow to you as ultimate trader.

    100 SPX points in a day,,,,,,,,,really?!

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  52. SC

    Your bottom for Aug 9 will occur tomorrow then a move to 1240 and thats it for the upside.

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  53. Capitulation coming in minutes.

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  54. Ye, V-bottom coming, mkts to surge up huge afterwards.

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  55. SC,

    Not to discount a violent short squeeze can happen, but I think a new high is not possible. It is not that it is not likely. It is not possible. I don't think the public will get back to stocks for a long, long time. If the market bounces hard, more long term holders will sell.

    1250 bounce is still possible. Not a new high.

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  56. No way 1260 Unless FED comes in and even then 1260 not in the cards.

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  57. Yes long, and about to get much longer...

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  58. LOL. mini drama here between SC and everyone, this is more exciting to read than CNBC soon hehe

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  59. A close today above 1160 may give it a chance.

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  60. SC, take a look at the breadth and what happened to to 4 weeks after such a downward thrust. Use $NYMO. THis is the biggest ever thrust down, but go to al the historical examples like beginning August 1998, July 23, 2007 etc.

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  61. SC surely this has to be over for a while and a relief rally of some sort coming into play shortly. This has been overdone IMO and just taken to far in one hit. What are your thoughts?

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  62. Post crash moves are very predictable SC, I recommend you bone up

    Look at SLV. Not inspiring trading one way or the other.

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  63. That bounce was pathetic. "Markets up Monday." This is my worst trade ever.

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  64. i have to agree with fart, that bounce was really sad, it like it didnt even take off at all from the station. 10 mins left of normal trading hour

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  65. We will get big bounces but this is dead cat stuff now.

    Wait for the positive divergences.

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  66. it almost like 130 ish point bounce tomorrow if it happens, takes a lot of patient here to not hit the sell button while it still not end of the world yet.

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  67. After Hours sell off going on now. Looks like no bounce coming and more selling after Fed speak tomorrow.

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  68. Playing out as I thought...............should see weakness into tomorrow and a rally starting wed.

    You can play that rally but understand it WILL BE SOLD INTO so manage your positions accordingly. If lucky the rally lasts into opex in an ABC type move. If not it will be a faded burst up that fails quickly.

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  69. May see a little lower tomorrow morning, a bounce to 1200 or so, and then bottom 1050 later Tues/Wed.

    New highs after that. Only due to an elastic band effect. A ridiculous large short squeeze. This is what the shorts don't realize is coming. Don't get caught!

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  70. With all due respect you were saying be careful to short, well over 100 points ago.

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  71. SC!!!!

    All due respect man.............that target and time changes quite a bit!

    I like the claws and the tail with butter.

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  72. Direction is down, there is zero divergence. Don't predict a bottom until it DOES happen. Bears in control.

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  73. 1095-1105 is next level I'm watching.............after that 1050.

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  74. The dynamics of this market are much different than what seems rational.

    The fact is that this mkt is a once only event without precedent.

    Think big.

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  75. Hi SC

    That was a notable change you made “May see a little lower tomorrow morning, a bounce to 1200 or so, and then bottom 1050 later Tues/Wed”

    Wondering what made you change your initial target for a bounce from 1260 to 1200 after all your rock hard unchangeable response before?


    Thanks!

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  76. But what does that mean?

    How are you changing your targets and timelines?

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  77. Simple, the mkt came down lower, and using the pattern that I have, there is a need to adjust for that. 60 points may seem like a lot, and in a normal mkt that is true. Not any more. We have gone from 50-100 moves to now hundreds of points moves.

    That is here to stay. The moves are going to be freakishly large from here.

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  78. The timeline is the same. The biggest selling is concentrated later on the 9th or 10th. I have said this for weeks, still the same.

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  79. I'm trying to follow your reasoning and your work which i respect but it has not worked for weeks as well.

    So it's not 1260 tomorrow?

    It's 1200 then lower to 1050?

    What is the time line for above 1370?

    Why did the cycle fail.

    Thanks

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  80. The time cycle is working perfectly, and so I have confidence in that. I just wasn't expecing it to selloff as much as we have seen.

    Once the bottom is in, I expect the moves to be just as violent on the upside.

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  81. Hi ckorey

    I think his reasoning is base on the market movement, today the market fall below 60 points of what his target was, so he lowered his target from 1260 to 1200. But same as you, I like the reason behind why did the cycle fail.

    SC please enlighten us.


    Thanks!

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  82. Hi SC

    Confused with your message “The time cycle is working perfectly, and so I have confidence in that.” ?

    Doesn’t what today’s market move basically crack the perfection even a little?


    Thanks!

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  83. This comment has been removed by the author.

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  84. Hi SC

    Please don’t take it as a meanful way from us, but just frustrated with the market move today cause it didn’t happen what we all expected according to your prediction.

    Anyways, I bought in a little TD today myself, just for the heck of it. Do you own any bank stock?


    Thanks!

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  85. Confused with your message “The time cycle is working perfectly, and so I have confidence in that.” ?

    I have been expecting hard selling into Aug 10th - as mentioned a month ago. That is what we have seen. It was more than I thought, but that has nothing to do with timing. The timing is correct.

    No, I do not have any bank stock currently. Long S&P with cash to add.

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  86. SC,

    Maybe you are still right with the Aug 9/10 bottom, just that you had one extra big bounce before this final low.

    Futures down 20 now. Got to have a lower open tomorrow.

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  87. Just to clarify what I said down 20. It meant down 20 from the cash close level. Low was 1100 (=cash 1103).

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  88. It will be interesting to see what happens tomorrow George.

    As far as I am concerned this selloff will not be complete until the 9-10th time cycle has passed. Preferably it is late on the 9th or 10th.

    Where this time cycle could be really valuable is if the mkts bounce tomorrow morning.

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  89. SC,

    What are your thoughts on silver here? You've been calling for a plunge to below $20 for months now. Now it seems like its setting up for that fall and you seem less focused on it.

    Seems like a 50% correction in silver is more enticing than a 25% rally in S&P. IMO, the silver plunge could happen here whether you're right about the S&P rally or not. Is it possible that your $45 target for silver's rally has undershot in the same way your S&P decline has overshot? Thanks!

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  90. SC...On FRIDAY you were so confident you had your time cycles correct and said you expect a 100 point gain Monday and 100 point gain Tuesday on S&P. Looks like its going the other way. I'll roger a guess and say we will go higher tmwr after Bernanke's speach (possible QE3 announcement etc).

    SC...I dont think your being realistic at all my friend. Weather we are going up or down, your always convience you got it right etc.

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  91. SC, Could QEIII announcement/hints by the fed be the trigger ???!

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  92. We are undergoing retrograde Mercury period at this moment...opposition to Neptune...the confusing and agitated exchange here is but an example of its principle.

    My postulation has been playing out lately.

    http://timecycles-timer.blogspot.com/

    Longer terms, yesterday Dow close below 11018 signified the 90 years cycle down has already kicked in and in progress, the cycle is not expect to end until 2012-2015..the eventual low is likely to coincide with Jupiter transit through Leo in 2013/2014.

    http://www.mmacycles.com/weekly-preview/mma-comments-for-the-week/mma-comments-for-the-week-beginning-august-1,-2011/

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  93. The bar for QE3 is high. But without it, we may actually flash crash tomorrow.

    Futures already 40 points below cash close.

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  94. MM2011,

    I can see where you are coming from, but I doubt that Silver is ready yet, and so would rather just watch it for now. As well, for this week there is enough to stay on top of already, and I would rather keep my positions simple.

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