I think we saw world markets taken up due to short covering on
the back of the Spanish bailout news. The Spanish Govt played the
EU for suckers as they deliberately timed their demands 1 week out
from the Greek election/referendum on the Euro, and in the process
extracted 100B euros with little or no strings attached.
--
Keeping eye on volume to confirm failed
rally. Likelyhood of markets rallying into Greek election
is low as prospects of +500B Euros Greek debt blowing up in the
face of the European banking system is far too real.
Posted by chartboy on 11th of Jun 2012 at 11:35 am
Hi FR,
This mornings action so far is text book action. Had the
gap actually held..that would have been the surprise. In fact, it
was pretty clear from early last week that a short term top was
going to be in place either today or early tomorrow. Once it was
clear we were getting a gap of that magnitude right into resistance
this morning there should have been little doubt that a reversal
was immenent.
"Moral of the story,
be very wary if the market continues to rally for the next
few days especially if the rally lasts until the later part of the
turn window (Monday/Tuesday). Should that occur, there is a very
high probability of a very sharp pullbackthat will at a
minimum correct a large part of the rally, but could potentially be
the start of another leg lower."
Posted by frtaylor on 11th of Jun 2012 at 11:57 am
Yes, I remember reading that, and thank you for chiming in this
morning. It's very helpful for me. For me, as a rank
amateur, a major difficulty is dealing with the sheer volume of
data and chart patterns, expert analysis and opinion (and otherwise
- so much out there!), and market action. I am mostly short,
though, as I have been heeding BPT and posts such as yours.
Posted by chartboy on 11th of Jun 2012 at 04:31 pm
Here is another item that helped confirm the likely hood of a
reversal this morning. Time balanced out for the head of a
potential inverse H&S pattern just as price was doing the
same.
Obviously if you are a believer in the inverse H&S pattern
this would strongly suggest a relatively balanced right shoulder
should appear as well in the next four days or so.
Posted by frtaylor on 11th of Jun 2012 at 04:53 pm
Yeah, that's a good confirmation that, so far, the possible inv
H/S is still very viable. But I also have your reversal
window scenario in mind in which we have another leg down (Steve's
deeper inv H/S pattern).
Posted by chartboy on 11th of Jun 2012 at 07:11 pm
First things first..this double top measures to the gap
fill....read how the markets trades with this pattern in sight for
an idea of how strong/weak the market really is in here without any
news.
Posted by chartboy on 12th of Jun 2012 at 07:50 am
No problem...To follow up, here is what I was talking about when
it comes to "reading".
Clearly the market closed in a very weak position last night
with the short term chart indicating a possible target down near
the gap fill if we broke out of the four day range. However,
instead we are seeing a little strength this morning.
That lets me know that the market is becoming a bit more
two sided here. It also tells me, more than likely, yesterdays late
day push down was more about taking out the stops below the last
swing low from a few days ago. Finally, the
continued weakness of US bonds, (strength in
TBT), also indicates that, for the time being, fear has subsided
quite a bit since last week.
Barring any fast unforeseen changes all of these items lend
credence to the idea that we are trying to form a right shoulder in
the potential inverse H&S pattern via a higher divergent low in
the next week or so.
Taking it one step further, one thing to always keep in mind in
a potential bear market...inverse H&S shoulder patterns often
form in bear markets. Then, they either break out and reverse
quickly or fail all together. Point being, the play book that would
frustrate the most people here would be to see a higher low form
here as the right shoulder, then the inverse H&S would set up
and potentially even break out..but instead of leading to a large
move higher...it simply serves as a bull trap.
frtaylor - after the initial reaction and euphoria, traders came
back to reality and understood that the problems in Europe are far
from over and that solves nothing.
Posted by frtaylor on 11th of Jun 2012 at 10:53 am
I suppose so, but that always looks like ex post facto analysis
to me. I find it interesting how hard it is to divine where
it will go, even given good news and futures action. If the
traders came back to reality, why were their actions counter to
that (futures) in the first place? Know what I mean?
I'm short some things, so I'm certainly relieved, as this
morning it looked like I'd be stopped out of a bunch of stuff
(still may! you never know).
from a bigger picture perspective. It is clear we have hit some
kind of bottom and that usually means some kind of seller
exhaustion. I would not short now unless you are hedging some
longs. I am long and have been for a week and I have my stop below
the clear bottom on the SPX. Seems pretty low risk to me.
good call off the low and there were good reasons for a bounce
there not the least of which was the fakeout break of the 200ma.
But this looks to me like there's plenty of reasons to stall and be
a choppy mess for a while
Posted by frtaylor on 11th of Jun 2012 at 12:11 pm
Right - I think a second time through Matt's newsletter is in
order. Certainly SPX last week broke through the bull wedge
that had formed on the daily. So a pullback would be just
that, and could easily play out in an inv H/S as Matt has laid out.
I'm not heavily short right now, and I have reasonably tight
stops on my shorts (VR, VRSK, GDX, PKI), and I'm not counting on a
new bottom although it would not surprise me.
5 min SPX
Posted by matt on 11th of Jun 2012 at 10:28 am
$SPX - Chart Link - testing the 200 SMA, also watch the primary pivot on this pullback, if that is lost, it wouldn't be good
I'm surprised how weak we
Posted by frtaylor on 11th of Jun 2012 at 10:42 am
I'm surprised how weak we are this morning given the Europe news and the futures reaction last night and this morning.
Title: I'm surprised how weak
Posted by rixx on 11th of Jun 2012 at 11:43 am
I think we saw world markets taken up due to short covering on the back of the Spanish bailout news. The Spanish Govt played the EU for suckers as they deliberately timed their demands 1 week out from the Greek election/referendum on the Euro, and in the process extracted 100B euros with little or no strings attached.
--
Keeping eye on volume to confirm failed rally. Likelyhood of markets rallying into Greek election is low as prospects of +500B Euros Greek debt blowing up in the face of the European banking system is far too real.
No reason to be surprised..
Posted by chartboy on 11th of Jun 2012 at 11:35 am
Hi FR,
This mornings action so far is text book action. Had the gap actually held..that would have been the surprise. In fact, it was pretty clear from early last week that a short term top was going to be in place either today or early tomorrow. Once it was clear we were getting a gap of that magnitude right into resistance this morning there should have been little doubt that a reversal was immenent.
I posted this last Wendsday:
http://breakpointtrades.com/blog/post/201837/
"Moral of the story, be very wary if the market continues to rally for the next few days especially if the rally lasts until the later part of the turn window (Monday/Tuesday). Should that occur, there is a very high probability of a very sharp pullbackthat will at a minimum correct a large part of the rally, but could potentially be the start of another leg lower."
Yes, I remember reading that,
Posted by frtaylor on 11th of Jun 2012 at 11:57 am
Yes, I remember reading that, and thank you for chiming in this morning. It's very helpful for me. For me, as a rank amateur, a major difficulty is dealing with the sheer volume of data and chart patterns, expert analysis and opinion (and otherwise - so much out there!), and market action. I am mostly short, though, as I have been heeding BPT and posts such as yours.
Here is another item that helped....
Posted by chartboy on 11th of Jun 2012 at 04:31 pm
Here is another item that helped confirm the likely hood of a reversal this morning. Time balanced out for the head of a potential inverse H&S pattern just as price was doing the same.
Obviously if you are a believer in the inverse H&S pattern this would strongly suggest a relatively balanced right shoulder should appear as well in the next four days or so.
Yeah, that's a good confirmation
Posted by frtaylor on 11th of Jun 2012 at 04:53 pm
Yeah, that's a good confirmation that, so far, the possible inv H/S is still very viable. But I also have your reversal window scenario in mind in which we have another leg down (Steve's deeper inv H/S pattern).
First things first..this double top
Posted by chartboy on 11th of Jun 2012 at 07:11 pm
First things first..this double top measures to the gap fill....read how the markets trades with this pattern in sight for an idea of how strong/weak the market really is in here without any news.
thanks CB.
Posted by frtaylor on 11th of Jun 2012 at 11:26 pm
thanks CB.
No problem...To follow up, here
Posted by chartboy on 12th of Jun 2012 at 07:50 am
No problem...To follow up, here is what I was talking about when it comes to "reading".
Clearly the market closed in a very weak position last night with the short term chart indicating a possible target down near the gap fill if we broke out of the four day range. However, instead we are seeing a little strength this morning. That lets me know that the market is becoming a bit more two sided here. It also tells me, more than likely, yesterdays late day push down was more about taking out the stops below the last swing low from a few days ago. Finally, the continued weakness of US bonds, (strength in TBT), also indicates that, for the time being, fear has subsided quite a bit since last week.
Barring any fast unforeseen changes all of these items lend credence to the idea that we are trying to form a right shoulder in the potential inverse H&S pattern via a higher divergent low in the next week or so.
Taking it one step further, one thing to always keep in mind in a potential bear market...inverse H&S shoulder patterns often form in bear markets. Then, they either break out and reverse quickly or fail all together. Point being, the play book that would frustrate the most people here would be to see a higher low form here as the right shoulder, then the inverse H&S would set up and potentially even break out..but instead of leading to a large move higher...it simply serves as a bull trap.
Just one series of possibilities to watch.
Does your time cycle work argue for a high on the opening gap?
Posted by lessarda on 11th of Jun 2012 at 04:41 pm
Yes...however, given all of the
Posted by chartboy on 11th of Jun 2012 at 04:47 pm
Yes...however, given all of the outside influences recently anything can happen from here.
frtaylor - after the initial
Posted by matt on 11th of Jun 2012 at 10:44 am
frtaylor - after the initial reaction and euphoria, traders came back to reality and understood that the problems in Europe are far from over and that solves nothing.
yes TomW1, sell the news...
I suppose so, but that
Posted by frtaylor on 11th of Jun 2012 at 10:53 am
I suppose so, but that always looks like ex post facto analysis to me. I find it interesting how hard it is to divine where it will go, even given good news and futures action. If the traders came back to reality, why were their actions counter to that (futures) in the first place? Know what I mean? I'm short some things, so I'm certainly relieved, as this morning it looked like I'd be stopped out of a bunch of stuff (still may! you never know).
I think you need to step back and look at the chart
Posted by tomW1 on 11th of Jun 2012 at 12:03 pm
from a bigger picture perspective. It is clear we have hit some kind of bottom and that usually means some kind of seller exhaustion. I would not short now unless you are hedging some longs. I am long and have been for a week and I have my stop below the clear bottom on the SPX. Seems pretty low risk to me.
SPY 60 min
Posted by bkout3 on 11th of Jun 2012 at 12:12 pm
good call off the low and there were good reasons for a bounce there not the least of which was the fakeout break of the 200ma. But this looks to me like there's plenty of reasons to stall and be a choppy mess for a while
Right - I think a
Posted by frtaylor on 11th of Jun 2012 at 12:11 pm
Right - I think a second time through Matt's newsletter is in order. Certainly SPX last week broke through the bull wedge that had formed on the daily. So a pullback would be just that, and could easily play out in an inv H/S as Matt has laid out. I'm not heavily short right now, and I have reasonably tight stops on my shorts (VR, VRSK, GDX, PKI), and I'm not counting on a new bottom although it would not surprise me.
Buy the rumor....sell the news.
Posted by tomW1 on 11th of Jun 2012 at 10:43 am