Sunday, 12 February 2012

Bull Market or Bear Market

Bull Market or Bear Market There seems to be a real bullish outlook on the market right, heck I am even bullish in the short term (NOT THE LONG TERM). Bert Dohmen is even bullish. When you look at the charts there is a 5 wave wedge / ending diagonal in the markets and there is only 2 spots for them. When you see an ending diagonal the run is over.

On the S and P 500 you can see the 5 wave wedge ending on the 9 th, but still within a channel on the hourly chart. Still bullish from a technical point except for the ending diagonal or 5 wave wedge.

 The Russell 2000 shows a breakdown from what should have been a bullish consolidation. No ending diagonal here. 2 bearish points here, a failure to stay above 2 support lines and a failure to go above a bullish consolidation.
 The Dow Jones has been the leader of the pack. An interesting note here is that from an Elliot Wave point of view. If this was to be a wave 2 in an impulse wave down the price of the DOW would not exceed the price level of wave 1. So based on this we going to be moving up to side ways to finish off this long term consolidation.
The Wiltshire 5000 shows an ending diagonal but is still within it's short term channel.

 In all, the general rule is to go against the crowd. The percentage of bulls out there is the same as last year this time. That's bearish, however, the market can creep up slowly for a while with low volume before collapsing. The turning point for me was when the Fed mention that there was going to be low interest rates till 2014. When that happened there was to be a serious turning point (according to my swing trading forecast model) in the market at that time and the prices of the index's went up through some key levels. Look at Martin Armstrong's Economic Confidence Model. His model shows confidence going down till June and then up till August 2013. His model is fairly broad. I am still in cash, I was tempted to go short the market's in the morning of February 10, simply because of the ending diagonal, the fact the markets moved together at the same time from a top, lots of bulls out there but the percentage of bulls can go higher, the DOW went above last years high even for a bit. The next pivot point is the beginning of  March and another one mid March. The pivot points right now aren't very precise till then. One pivot point that comes up big time is April 7th. Is that date a high or is it a low, I'm not sure yet. I don't trade for the sake of trading. Everything has to line up, or don't trade. The opportunities are always coming up in the market, ALWAYS.

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