04/28/2012 Weekend Discussion

[pezhead9000]

27-April Hourly TRIN - for an "up" day it looks like short-term distribution
"Low readings, below 1, show relative strength in the AD Volume Ratio. High readings, above 1, show relative weakness in the AD Volume Ratio. In general, strong market advances are accompanied by relatively low TRIN readings because up-volume overwhelms down-volume to produce a relative high AD Volume Ratio"

[Mr. BachNut]

I have seen some previous posts concerning Lindsey's three peaks and a domed house pattern.
I was just looking at Bulkowski's piece on this pattern (http://thepatternsite.com/3peaksdome.html) and he says the move from point 14 to 23 (the highest high of the pattern) lasts 7 months and 8-10 days. That timing seems overly precise to me but... if you place point 14 at the October low, it appears point 23 would land somewhere between May 12-15. So, this could be interesting to watch. I don't know where Bulkowski came up with that timing. Are there any Lindsey experts out there who have experience with the pattern or who would have a view on this?

Mr. Bachnut

below is a post i made 3/27 in response to Kena's note. he argued at the time we were between 22 and 23. The lady i got this from is Helene Meisler over on real money. the short version is depending on where you assume point 14 is--point 23 happens between may and july. I am open minded but often old highs act as attractors--i would love to see the 2007 high (stops) get blown out first--esp with qqq and aapl stalling out early--and am wondering if we can get this near the end of the 2nd quarter. stuff like nyse mcclellan oscillator (nymo on stockcharts) and nyse summation index (nysi on stockcharts) don't look right for a major decline but in 20-40 trading days could set up flawlessly (ideally with lower highs on nysi).

A ta person i have followed for 12 years actually has george lindsays notes (given to her by the guy she learned from) it seems there are over 100 pages of text this guy made on this pattern--including 27 pages of notes (single space typed) on "counts from the middle section". I think this overall makes the pattern less trustworthy. anything too complex is hard to use trading. never the less--a key idea is there is a set time for the move up from either 10 or 14 depending on which count you use. (yeah he had alternate counts) the period of time is 7 months 10 days (all days are counted not just trading days) which puts the key top in may (best case) to july worst case. given the complex nature of the pattern (along with the absurd detail in the notes) most likely the best way to use the pattern is more of a general idea and with the widest timing.

(a general idea means look at each move and consider the psych at that time--as opposed to be being 100% focused on the exact visual image of the pattern. all patterns are actually made up of market trading and psych--and as al brooks notes--"if it looks like a pattern (even if it is not exact) it will likely act like a pattern".)

what i don't see is on spx why we have to be between your 22-23 as we have only a shallow pull back to the daily 20 ema. you could be right of course--i would just consider the timed move from 10 to 14 which of course were the lows in 2011.

finally the most useful part of the pattern to people on this site might be the shape of the top (so 21 to 25) if you pull up a monthly and look at the last two tops this is a very different idea. the psych behind the proposed domed top is clearly an explosive move (after a failed pullback). the most logical place for such a move would be close to the old high of 2007. Any breach to the upside would force epic short covering (as many traders will lean short at such a major event) and this would create a short term move of say 50-150 spx points. That in turn could force a move over the last high (and ideally 1600) pulling in everyone with the idea a clear new bull market was in place.

and that of course would finally be the last move of this advance (about 6-12 months after many thought the move would happen). the timing is interesting in terms of the election (eg election could be factored 6 months prior to event and start having effect) and the ECRI recession call (for ball park may-aug of this year) since they have a very good record in general.

only my opinion but (1) would not fixate too much on the exact shape other than the major psych behind the pattern. (2) am not convinced that we are 22-23 but certainly cannot prove we are not. (3) if we get a forced move up around (just at just under or just over) the 2007 high--that is going to be interesting--esp if we get a fast breakdown rather than the typical 6-12 month top formation.

Bonus--readers may want to pull up an dow chart of 1964 to 1984ish and consider the pattern in that light just for "fun".

I am with you Taggard.
I can see how one can count this into July.
If May is the top, a head and shoulders pattern ought to take shape over the next few weeks.
If July is where it is at, the 2007 highs are an intriguing target, perhaps after we get some more chop here first before marching up.
This pattern violates the KISS principle and seems overly precise, which makes it suspect and improbable.
I can also see though what you mean by a psych story implied in the pattern and that it could fit scenarios ahead.
Bottom line for me is that any head and shoulders with some good scale to it that emerges in the next three months or so could be a barn burner when it completes.
We'll keep this on the radar...
Thanks.

[btran874]

Holy Shi-ite! This chart shows clearly we are short term, medium term, long term bullish and could be challenging the 2007 high at SPX 1576.09.

[taggard]

I am with you Taggard.
I can see how one can count this into July.
If May is the top, a head and shoulders pattern ought to take shape over the next few weeks.
If July is where it is at, the 2007 highs are an intriguing target, perhaps after we get some more chop here first before marching up.
This pattern violates the KISS principle and seems overly precise, which makes it suspect and improbable.
I can also see though what you mean by a psych story implied in the pattern and that it could fit scenarios ahead.

Bottom line for me is that any head and shoulders with some good scale to it that emerges in the next three months or so could be a barn burner when it completes.

We'll keep this on the radar...

exactly what i am thinking. right now the ideal set up would be
(1) they try to take it down
(2) it goes down just a tiny bit further than expected by most
(3) put call spikes and stays just a bit higher
(4) we wind up breaking over the 1420 area and flipping the last range which hopefully is 100-150 points (eg we dip to 1340-1290).
(5) this fits cobra's model--the old "try to get it up into the end of the first half thing" and the 3 peaks and a dome thing.

Bonus sentiment point--the idea right now is the second half is where the upside is this year. since the start of the year econ forecasts (other than ecri) have focused on a lame first half and a blow out second half (forecasting up to 16% growth in the 4th quarter year over year). god knows anything is possible--but the preponderance of opinion in the same place is scary--esp with ecri focused in egg-xactly the other direction.

as you say--any head and shoulders is worth watching.

[cougar]

For those of you who like patterns, here are my Elder Impulse Charts, listed side by side. Note that first color column is close to close Elder, second High to High, third Low to Low (red = down day, Green = up day, Blue=neutral). Any patterns/signals? Any feedback would be appreciated. Thanks

Well “xfradnes”…there is nothing very obvious there, but one might see the Europeans moving towards a “make-believe neutrality”, while the Han-seng is moving away from it. In the context of the coming elections in Europe, this is like the calm before the storm..

Chart 1: $SPX has one more chance (I would say… in early MAY) to hit 1440 before dropping.

Chart 2: SPY: the week in retrospect, with 4 clean BUY signals...

Chart 3: …but the near UP future of SPY seems limited by a projected bat and the top of the MM octave.

[ClarkW]

Chart 1: $SPX has one more chance (I would say… in early MAY) to hit 1440 before dropping.

Chart 2: SPY: the week in retrospect, with 4 clean BUY signals...

Chart 3: …but the near UP future of SPY seems limited by a projected bat and the top of the MM octave.

Hey Cougar, great to see you on here. Trying to learn from your charts, my knowledge of the 'bat pattern' is EXTREMELY LIMITED, I know if it...that's it. So here's my question: How do you get $142.34 for your projected price?
I thought it had to be either 1.27AB=CD. Am I missing something?

Thanks from a newbie!

[Cobra]

Thanks for posting your study, Cobra. It's very informative but could be even more so if the entry and exit rules were to accompany it. If you get some time, would it be possible to add them to the post?

TIA

slopete

First of all, welcome aboard.

The back test is just to buy the bullish engulfing Friday close and sell the next week, 2 weeks, 3 weeks, etc etc at Friday close.

[xfradnex]

For those of you who like patterns, here are my Elder Impulse Charts, listed side by side. Note that first color column is close to close Elder, second High to High, third Low to Low (red = down day, Green = up day, Blue=neutral). Any patterns/signals? Any feedback would be appreciated. Thanks

Well “xfradnes”…there is nothing very obvious there, but one might see the Europeans moving towards a “make-believe neutrality”, while the Han-seng is moving away from it. In the context of the coming elections in Europe, this is like the calm before the storm..

Chart 1: $SPX has one more chance (I would say… in early MAY) to hit 1440 before dropping.

Chart 2: SPY: the week in retrospect, with 4 clean BUY signals...

Chart 3: …but the near UP future of SPY seems limited by a projected bat and the top of the MM octave.

Cougar,
I like your chart 2; the RSI set up, seems to speak to me. I think you are right about the storm. As for China, it seem they have been overbuilding like we have done (we paid the price). They have greater control of their economy and markets, we may never see any real down turn.
As far as my charts are concern. it looks like Cu has woke up on 12 Apr, which makes me feel less sure of any complete collapse of the US stock markets. It seems allot of markets went green after dr Cu woke up. It looks like there is pattern on HSI on 27, 26 April and 17,16 April that indicate that HSI will be green tomorrow. I expect that since there is green across all markets the "happer" markets will be green also (Dow and S&P) Monday.

[mac769]

It does not happen too many times that I see a clearly bearish gartley pattern on the S&P Futures and at the same time a bullish gartley on the USD-Index on the 4-hour scale.

This could last some days to play out, but the implications could be quite substantial.

But you can judge for yourself from the charts:

[cougar]

Chart 1: $SPX has one more chance (I would say… in early MAY) to hit 1440 before dropping.

Chart 2: SPY: the week in retrospect, with 4 clean BUY signals...

Chart 3: …but the near UP future of SPY seems limited by a projected bat and the top of the MM octave.

Hey Cougar, great to see you on here. Trying to learn from your charts, my knowledge of the 'bat pattern' is EXTREMELY LIMITED, I know if it...that's it. So here's my question: How do you get $142.34 for your projected price?
I thought it had to be either 1.27AB=CD. Am I missing something?

Thanks from a newbie!

OK Clark...Nice to hear from you…This top of the bat is IMO the highest limit = the size of the down trend extended from the low recent point on a parallel to the previous short UP. What is nice is that in the middle with have a isosceles triangle. But it could also stop right here (6/8) or go to 7/8.
According to my very unorthodox but lucrative view, if it stops at 7/8 and drops than that level becomes “top of the octave” and all the other MM pivots drop one notch lower…
Other intraday charts will help us determine what to do at the right time…

[ClarkW]

Chart 1: $SPX has one more chance (I would say… in early MAY) to hit 1440 before dropping.

Chart 2: SPY: the week in retrospect, with 4 clean BUY signals...

Chart 3: …but the near UP future of SPY seems limited by a projected bat and the top of the MM octave.

Hey Cougar, great to see you on here. Trying to learn from your charts, my knowledge of the 'bat pattern' is EXTREMELY LIMITED, I know if it...that's it. So here's my question: How do you get $142.34 for your projected price?
I thought it had to be either 1.27AB=CD. Am I missing something?

Thanks from a newbie!

OK Clark...Nice to hear from you…This top of the bat is IMO the highest limit = the size of the down trend extended from the low recent point on a parallel to the previous short UP. What is nice is that in the middle with have a isosceles triangle. But it could also stop right here (6/8) or go to 7/8.
According to my very unorthodox but lucrative view, if it stops at 7/8 and drops than that level becomes “top of the octave” and all the other MM pivots drop one notch lower…
Other intraday charts will help us determine what to do at the right time…

Thanks for your response Cougar. Your answer is certainly 'above me' but that's okay, I'm learning. Thanks again!