Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Shows Signs of Interim Peak

Stock-Markets / Stock Markets 2010 Apr 17, 2010 - 07:34 AM GMT

By: David_Banister

Stock-Markets Best Financial Markets Analysis Article

Markets move in large wave swing patterns based on the stretches and swings of investor optimism to pessimism.  These are known as Elliott Wave Patterns as theorized by R.N. Elliott in the 1920’s and 1930’s.  I became a student of his work in 2001 amidst the market mess, and after a few years became a convert that markets move largely on crowd behavioral patterns.


With the above said, I look for clearly defined wave patterns if discernible to help me with clues as to where we are in the market bear or bull cycles.  Besides the chart patterns themselves, you can review Investor Sentiment ratings, Consumer Confidence numbers, and other data to help figure out which direction the crowd is leaning, and if that rubber band is being stretched too far both on the optimistic or pessimistic side.

Reviewing the recent wave patterns and investor sentiment surveys were certainly telling me we were in the home stretch after 13 months of bullish movements in the indices.  13 is a Fibonacci number by the way, and crowds also tend to behave within Fibonacci sequence patterns both during corrections and rallies.  Here is some evidence I’m looking at for a decent corrective pattern to likely unfold over the intermediate time frame.

1.  Investor Sentiment-  Bulls in the latest April 13th survey were running hot at 52% vs just 19% for Bears.  This 2.8 to 1 ratio was the highest since July and October 07.  The % of Bears is similarly at the same extreme lows seen in Jul/Oct 07 tops, and the summer of 2009 interim highs.

1a.  VIX or the volatility index levels were at extremes for complacency, another sign of impending tops.

1b.  Fibonacci re-tracements of 61% would be at 1233 on the SP 500 index from the Oct 07 highs to March 09 lows.  We were within 1% or so of that figure and pretty close.  The Nasdaq hit a 78% retracement level this week, also a typical topping point in a wave structure.

2.  Bears are dead all over the roads, consistently wrong and consistently calling for tops nearly everyday.  I think they finally got exhausted, which would actually be a sign of a top.

3.  Headlines in various newspapers exclaiming the strength of the bull (NY Times etc.)

4.  Elliott Wave patterns were clearly “impulsive” or bullish since the February 5th pivot lows.  The key is figuring out when the 5th wave of a 5 wave impulsive pattern ends, because that is extremely difficult.  5th waves can extend and confound bears and run higher than most expect.  In most cases I don’t even attempt to determine where they terminate. However, you can watch seminal events and market reaction to give you clues, combined with the various indicators mentioned above.

Today’s Goldman Sach’s charges as levied by the SEC were clearly politically driven and rather old news.  Anyone who has read Matt Taibbi’s articles in Rolling Stone over the past two years is aware of how they manipulated AIG and the Government to cash in on bearish bets against the mortgaged back securities market, the one they helped pump to the moon.  The impish lawsuit or allegations filed today are kind of a joke, a drop in a rather large bucket as it were.  However, this event can serve to terminate a bullish pattern and shock the crowd into a “negative” swing or shift in sentiment.  The crowd goes from “what me worry, I’m a big risk taker and making huge money trading!” to… Hey, I don’t think I like this risk game anymore and I want to protect my money.

So, today’s news is really nothing new or all that material since it is old news… but, it’s possibly a seminal event that terminated a 5 wave bull structure… just nobody knows it yet.  To watch Jim Cramer ever so briefly tonight tell everyone to buy the banks and chip stocks after the huge run they just had, indicates nobody is really worried.

I digress and will post my Elliott Wave SPY (SP 500 ETF Index Fund) below.  It appears that 5 clear waves up terminated today, but we will need to see the market reaction or action on Monday to confirm.  Today was OPEX options expiration, and that by itself can cause volatility.  If the market continues downward early on next week, we should be expecting a Zig Zag correction to 113 on this SPY, or 50% of the recent rally.  If the market powers higher than today’s highs early in the week, then the impulsive pattern has a bit more legs left… though likely running on fumes.  I moved to close out some positions quickly today in our ATP service to be defensive.  The advice here is to go and do likewise for now.

Dave Banister
CIO-Founder
Active Trading Partners, LLC
www.ActiveTradingPartners.com
TheMarketTrendForecast.com

Dave Banister is the Chief Investment Strategist and commentator for ActiveTradingPartners.com.  David has written numerous market forecast articles on various sites (SafeHaven.Com, 321Gold.com, Gold-Eagle.com, TheStreet.Com etc. ) that have proven to be extremely accurate at major junctures.

© 2010 Copyright Dave Banister- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in