Monday, March 16, 2009

What is this fall made of?

What is this fall made of is the question. How strong? How long? Well, to answer that question we have to find the answer to another first. Where are we in the count? Well, no one seems to be quite to sure about that. P(1), 4.5 or 5.5 are the three possibilities and they will each deliver a different result. As far as my preference, I have none. As far as my thoughts, I do not know. All I know is what the chart has delivered for the past two weeks and when this move down stops, we'll all then have a greater degree of confidence as to where we are in the count.

Very overbought conditions finally came to roost at 774 SPX. Where have I heard that number? Was it my March 8th post? "As for my target of 4.5, 774 to 807 is it." Thought I heard that number somewhere. I had begun him-hawing with 771 like everyone else, but held true to the number. Overbought, AA helping after hrs with a dividend cut, falling out of the wedge and all the indicators in a nose dive. Sounds easy right? Don't be fooled and get all giddy about new lows.

Now lets get to where we are going from here. First we have to figure out which bottom to take our retracement from 667 or 672 or 717. Uh oh, three bottoms? Yup, I could throw in a couple more but won't. How about key support levels? 732, 724, that zone from 710 to 715 all are valid. Uh oh, lots of support levels? Yup, I could throw in a couple more but won't. What was that you were saying about three scenarios for where we are? Yup, I could throw in a couple more but won't. I thought this was gonna be easy? Nope, nothing easy about where we are right now.

Sorry about that last exercise, but it was partly for humor and partly to describe how difficult it is to determine just where we are gonna stop. I lied above. I do have a preference. I have been guessing 5-3-5 or zig-zag all along, and lord knows how long I have been spouting off about how hard 4.5 was gonna be when we got here to figure out cause 2.5 was simple. I do not think 4.5 is over just yet and all the stocktockers spewing 625 targets, get a hold of yourselves. We gots to take babuh steps heugh. Work this fall down retrace by retrace, support by support and when the indicators say it is time to get long then you get long just like we got short here at the top. Thus, I am not predicting a target for the fall, because I have NO CLUE where we are in the cycle.

I'll pay attention to the indicators and when they say turn and where they say turn we'll then have a better idea in the cycle of life. I'm still voting 4.5, yes. I think this fall will be less severe than most. If we take out 710 (which I am not remotely thinking about right now) I may be come a believer in 5.5. I'll watch the 60m ma10 and BB20ma interaction. As most of you know the ma10 is one of my favorite indicators to watch. You may be late to the party, but I guarantee you'll be at the right party.

Let's start with SPX 732.40 as the first target and work our way down to the 715 - 710 zone. Watch the indicators closely (I'm sure I said that already). At this time I actually prefer the zig-zag off the 731 back to retest the 774 and possibly still be in 4.5. That is what I really like, but I'm not married to it. Watch the indicators and the charts and do what they say to do. Don't get caught up in the bottom calling mumbo jumbo. This is not the place to make a call or get over convicted to one side or the other. I'm short in SDS, BGZ, EEV and some other stuff. I'll peel some off as the indicators tell me to. I ain't skeered to get lung ethugh.

Good luck and keep your powder dry (especially for the bull run that is just around the corner).


  1. Great stuff. I remember your huge call on the rising wedge earlier this year. Doubled down on my shorts DXD, QID, SRS, SDS when the market was strongly green today. Looking at energy when this wave is done.


  2. Well done Kalkgrun. I added to Friday shorts as well this afternoon.

  3. Shanky - pls can you explain what you are looking to happen in the ma10 and BB20 - sorry did not understand from your notes.

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  5. AS - look at the moving average lines on the chart. The blue line is the ma10. There are three other a 50, 100 and 200. The BB (Bollinger Bands) are the dotted lines that have a dotted line in the middle that is the BB 20ma. It is bullish when the price is above the MA10 or the BB 20ma. Even more bullish when above both. The opposite is true, so when the price (in this case) drops below the ma10 this is the first POSSIBLE sign of a trend change. When the ma10 crosses the bb 20ma that is a POSSIBLE confirmation. Follow the lines back thru the chart or on one of my other cnarts in Stockcharts to see what I am looking for and to get familiar with the ma's and their relation to the price. Thanks for the read and comment.

  6. Looks like volume is low andwith the nas up +31 adding more QID.


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