Transports are a train that's still chugging toward new highs

Ready for a Dow Theory bullish (buy) signal? Got IYT (ETF for the Dow Transports or $TRAN)?! There isn't enough buzz about the Nasdaq having exceeded its 2007 high, but it'll probably be different when the Transports index manages that feat, as it's poised now to do. That's because, unlike the Nasdaq, the $TRAN's 2007 high was higher than its 1999/2000 era peak. The Dow Transports reaching to all-time highs is a bullish Dow Theory signal that will be confirmed if - and when - the better-known Dow Industrials (DJIA or $INDU) do the same. On a simple wave basis (similar to a huge reverse (bullish) head-and-shoulders pattern), the $TRAN should gain an additional 10% to hit at least 6000. Notice that the point and figure (P&F) chart at bottom, below, indicates a bullish target about 6350.

As long as the Transports index doesn't violate recent swing lows (thus erasing the P&F chart warning), its apparent wave count and technicals look supportive for it to continue flying high. There are some who especially like the airline sector, by the way. Interestingly, Dow Theory is a very old theory (precursor to R.N. Elliott's Elliott Wave Theory) saying that when BOTH the Dow Industrials and the Dow Transports make new swing highs (or swing lows), it's bullish (or bearish) overall. When it's only one, then it's tentatively bullish (or bearish, if new lows), until it's "confirmed" by the other index doing likewise. So this won't be confirmed until the Industrials make new all-time highs. You can see from the Transports' higher highs and higher lows on the daily chart, the volume-price bars (showing good support that's being moved up from now), and technicals in the daily and monthly charts below, this index is going strong. Certainly the Transports' strength bodes well for the rest of the economy and markets. It shows that "something's moving"!

In that sense, this bullish indication is similar to that provided by the Baltic Dry Index ($BDI); something I addressed in a post last week. So for my readers who went long on Wednesday or Thursday last week on that (perhaps along with other things we've pointed out here) - how's that working out for you? Pretty well ... and with a stop just under last week's lows, it should be a good long-side swing for a while!

Reading list to check your weekend market analysis reviews

With the 3-day holiday weekend festivities I didn't take enough tine to collect and post links for the great weekend roundup we normally like to do for readers. So here's a delayed version to help you double-check and make sure you're seeing all the analysis that helps interpret what's going on with the markets. Of course we already post directly here the ones we feel excel in "pointing the way"! But many like me also enjoy keeping an eye on what others are seeing and saying. So here are a couple, and I'll add to this list later today!

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Terry Laundry's weekend updates - here's quoting what his main page shows from the weekend:

Welcome to Terry Laundry's T Theory™ Observations published each Sunday afternoon. At this site we look at interesting topics that relate to the "bigger picture" investment world as interpreted by my T Theory™ principles. For a more detailed view you should visit my daily short term updates at T Theory Foundation: T Theory Calculations, Daily Updates, Charts and Data. If you are new to T Theory then you might want to read or listen to my T Theory Tutorials at T Theory Foundation. These sites are for the purpose of demonstrating how T Theory can explain market trends since 1966 in a unique way that I believe is superior to the alternatives. If you have questions see the email link below.
T Theory FoundationThis site is sponsored by my investment company ASIC which has applied T Theory™ to managed accounts since 1978. First time visitors should go to American Shareholders OnLine and read my personal background, our management results using T Theory, and pay particular attention to our proprietary " Best Bond Strategy™ " which we believe is the best path for those of us who are conservative investors. Otherwise we make no recommendations as we are generally negative on the long term trend for equities but have a bullish forecast for gold as a haven.

T Theory Observations for Sunday May 30 2010
Audio Summary (no chart) Audio Commentary Download TTO20100530-Summary

Below open up Audio and start then open up PDF Chart separately to view
The Advance-Decline T #13 Update
Chart Download A-DT#13-20100528pdf
Audio CommentaryDownload TTO20100530-AD-T#13
The Short Range T Update
Chart Download 20100528-SRTvopdf
Audio Download TTO20100530-SRT
End of this Sunday's T Theory Observations
Each Sunday, unless otherwise noted, I post my observations here by Sunday afternoon. When I post the Charts on Saturday don't email me questions until the full Sunday presentation is finalized. My mp3 audio files provide the bulk of the commentary. If you have a problem listening to them, or they cut out, experience shows that your computer's audio memory has become saturated. A restart of your computer should clear up the problem.

Technical Market Report for May 29, 2010 Mike Burk Safehaven.com, at http://www.safehaven.com/article/16967/technical-market-report-for-may-29-2010.

Dow Theory Update Tim Wood Safehaven.com (5/29), at http://www.safehaven.com/article/16969/dow-theory-update.

Schaeffer's Monday Morning Outlook: Despite Worst May in Decades, DJIA Held Above 10,000 - here's a quote of their introductory paragraph:

Well, there's not much good to say about May, is there? We saw a flash crash, followed by a 400-point relief rally, followed by a slow motion freefall, followed by a nearly 300-point rally. The triple-digit drop on Friday was just an exclamation point to end the week and month. The Dow Jones Industrial Average held above 10,000, but the Dow retreated more than 1,000 points below its highs at the beginning of the month. Looking ahead, Senior Technical Strategist Ryan Detrick is filling for Todd Salamone this week. The always irrepressible Ryan acknowledges the grim technical picture, but he also sees evidence of a coming bounce. Among other evidence, Ryan notes that the indexes generally held at their February lows, potentially creating a "nice-looking double bottom." Next, Senior Quantitative Analyst Rocky White takes an historical look at bull market pullbacks to see how the market has performed following these periods. Specifically, Rocky is looking at bounces off the S&P 500 Index's 200-day moving average. Bulls should find his conclusions heartening. Finally, we wrap up with a look at some key economic and earnings reports slated for release this week.

A Technical Tip You Can Use ... Marty Chenard Safehaven.com (5/28), at http://www.safehaven.com/article/16958/a-technical-tip-you-can-use-.

Equities market analysts study the odds whether this drop is the big one - or comes later after another high in May

One of our favorite weekend features is to round up what other talented analysts are seeing and saying about the markets. There had been general consensus among those we respect that the stock markets would peak out during about mid-January (about the 15th-18th or as late as the 21st - we got about halfway between), somewhere above 1140's (though we didn't manage 1160+). Now what? While some see the markets retesting the March 2009 lows next, others are looking for less of a drop and then another rebound to new highs in May. Possibly as far out as August, but at least in May. Not that I can figure out what the Elliott Wave would be for that - will see in any event!

So - Here are some links to what various analysts are saying this weekend, which I believe my readers will find interesting:

T Theory Foundation: T Theory Calculations, Daily Updates, Charts and Data, 1/30 at http://www.ttheoryfoundation.org/t-theory-calculations.html. Click the link to his site to see his chart going along with his following comments:

Saturday Morning 9:00 AM Jan 30 2010 Comment for Friday Jan 29 Close: T Theory Forecast remains bullish for the longer term based on the long term AD T #13 but the S&P continues breaking down below the mid-channel support noted in the chart (Negative).

The W Bottom ? in the volume oscillator is likely to be false. Note as the S&P is breaking below the black mid-channel bullish market support line, the Arms Ratio for the last 3 days has been 0.75, 0.85, 0.99, all overbought readings that imply the market is not actually getting oversold. This in turn means the AD Line is weakening in line with the volume trend which is not good.

I would conclude the actual low before resumption of the AD T will have to come from the lower green envelope now around S&P 1046. And I wouldn't be surprised if the actual low was a selling climax type due these persistently bearish developments.

Terry

Also - Safe Haven | Technical Market Report, by Mike Burk 1/30 at http://www.safehaven.com/article-15650.htm. Always a good read for technical insight into the stock market.

Market Observation - Tim W. Wood 01.29.2010 - Discussing cycles and Dow Theory, at http://www.financialsense.com/Market/wrapup.htm. Tim seems to agree with the idea of this troughing action making one or two lows, then higher later in the year before the next devastating big move down.

Safe Haven | Global Default Problems? by Marty Chenard, 1/29 at http://www.safehaven.com/article-15636.htm.

Here's one that's new for me - at least it has some interesting chart views to consider. And even got me thinking about 1150 -60 to 1090, then 1097 -60 to 1037 (or something like that). Although another idea would be simply 1150 minus the classic 90 SPX points, to 1060 Hmm, dunno ... Anyway let this article speak for itself: Safe Haven | BANG: Right Down to
Support! by J.D. Rosendahl, 1/30 at http://www.safehaven.com/article-15645.htm.

Monday Morning Outlook: Dow, SPX Facing Major Technical Hurdles After Pullback, 1/30. Todd Salamone sees support 1040, resistance 1100-1110:

Whoops. The Dow Jones Industrial Average slipped another 1% last week, following on the heels of its 4.1% swoon the previous week. That helped add up to a 3.5% loss for the month of January, the worst performance for the blue-chip index since February 2009. Looking ahead to next week, Todd Salamone, Schaeffer's Senior Vice President of Research, is looking for bullish signs, but he concedes that the technical backdrop has weakened considerably. He notes, for example, that the S&P 500 Index has broken below its 80-day moving average for the first time since the March 2009 bottom. Next, Senior Quantitative Analyst Rocky White takes a look at the January Barometer -- whether the market's performance in January foretells the rest of the year -- and doesn't much like what he sees. Finally, we wrap up with a look at some key economic and earnings reports slated for release this week.

And here's another comment from "Method" today:

Method said...
Post from 1-9

Based on Fib time relationship, I have 4 turn dates coming up on Jan 17th & 18th. This suggests that the top will be next Friday (1/15) or the following Tuesday (1/19).
It could head down from here or bounce to a new high around Feb 15th. If the close on Jan 29th is higher than next weeks high close - the trend will change around Feb 14th - otherwise the trend change will be mid Jan.
The next trend change date will be May 22nd.
Corrections will come around
Feb 18-26
Mar 12-26
Apr 12-16
and maybe one more around May 13th.
The bottom for the year will be either Sep 7th or Oct 14th.

Jan 30 Fib Turn Date Update

The lower close on Jan 29th confirms the downtrend leg for Jan 19th as a trend change date. I do expect a one day hope rally - maybe Monday.

What to expect next
The turn point at Feb 14th should only produce a one day high on either side of that date and then continue down or sideways. This date may also correspond with a low in oil.
Counter trend rally - this should start moving up around the Feb 19th time frame (SPX 1030?) and end on or between Feb 23 - Feb 25th.

Next Trend Change Date
I was originally looking at May 22nd, but the Jan 19th top setup a potential trend change in March. I'm looking for a low to occur between March 12th to March 17th (SPX 993?) with an alternate date of March 26th if price goes lower after March 17th.
Unless the March turn date sets up another trend change date, it will be 2 months before the next trend change date, so I'm considering that this may be a large triangle or wedge formation.
Since the dates did not lineup exactly, I am little skeptical that this may not be a trend change but rather a counter trend rally that will end March 26th.

Weekend review - technical analysis and related observations on the financial markets

Folks, each weekend we like to review what other analysts are saying about the markets. This weekend holiday preparations are leaving me less time to do much other than simply list a batch of the most helpful or interesting. That's not to say there aren't more out there that we'd add if some more time's available. But you'll do well with these at least!

This weekend's Terry Laundry's T Theory Observations by Terry Laundry at http://www.ttheory.com/

You'll want to check out his charts and audio that go with this:

Update for Sunday December 6 2009. Today I have expanded the 1966 to 2009 basic A-D T chart presentation to include all important Ts detailed in the tutorials in order to answer some reader questions and better put the big picture more clearly into perspective. I had planned to answer some detailed technical questions today but I am postponing them until next week.

As usual look at the first PDF Chart then listen to its Audio Commentary. You should be able to have the chart visible while the audio is playing.

Technical Market Report by Mike Burk at Safe Haven, http://www.safehaven.com/article-15204.htm

Another set of interesting blogs and site articles:

Check out the "Mr Topstep" market commentary and analysis videos at Youtube, they're expecting 1130-1150+ by year end although they tend to focus on daily or short-term setups so that is subject to change. Find them by following at Twitter, http://twitter.com/MrTopStep.

Swing traders may be interested in free access to Carl Swenlin's service for most of December; you can decide if it's helpful. I do think his swing approach works just fine for KI$$ approaches to investing, actually. At http://www.decisionpoint.com/prime/dailycharts/dailymenu.html.

Tim Wood of Cycles News & Views writes about housing this weekend, at both Financial Sense and at Safe Haven. He's showing technical signs of a small downleg into spring 2010. http://www.financialsense.com/Market/wrapup.htm.

Here's the link to Tim Wood's article on Housing at Safe Haven, at http://www.safehaven.com/article-15206.htm

If you read Marty Armstrong's Nov. 26 newletter, you know he projects a real estate low in 2012, then a bounce for a few years, then way, way down into - well, I think it's somwthink like 2033!

Anyway, Tim's article is a good read. And Tim also adds:

I have begun doing free Friday market commentary that is available at www.cyclesman.info/Articles.htm so please begin joining me there. The specifics on Dow theory, my statistics, model expectations, and timing are available through a subscription to Cycles News & Views and the short-term updates. I have gone back to the inception of the Dow Jones Industrial Average in 1896 and identified the common traits associated with all major market tops. Thus, I know with a high degree of probability what this bear market rally top will look like and how to identify it. These details are covered in the monthly research letters as it unfolds. I also provide important turn point analysis using the unique Cycle Turn Indicator on the stock market, the dollar, bonds, gold, silver, oil, gasoline, the XAU and more. A subscription includes access to the monthly issues of Cycles News & Views covering the Dow theory, and very detailed statistical based analysis plus updates 3 times a week.

Daneric's Elliott Wave blog is showing some VIX/SPX charts that would go along with Tony Caldaro's new 1158-1168 target area for the SPX. At http://danericselliottwaves.blogspot.com/.

This weekend's Monday Morning Outlook: Bulls Slow Pace as We Approach End of Year, at Schaeffer's - http://www.schaeffersresearch.com/commentary/observations.aspx?ID=96651:

There was no shortage of drama last week -- fallout from Dubai and Black Friday, and a far better-than-expected unemployment report. The Dow Jones Industrial Average (DJIA) responded by climbing 0.8%. Looking ahead, Todd Salamone, Senior Vice President of Research, examines several technical resistance levels on the S&P 500 Index (SPX) and concludes we might be stuck in a short-term trading range. Next, Senior Quantitative Analyst Rocky White takes a closer look at the implied volatility skew on S&P Depositary Receipts (SPY) exchange-traded fund options, what that might tell us about hedge fund activity, and why that might signal a short-term pause in the market's bullish trajectory. Finally, we wrap up with a look at some key economic and earnings reports slated for release this week.

Last for now but NOT least, at Bill Luby's VIX and More: New Dr. Brett Series on Lessons for Developing Traders - a blog post about this, by Bill Luby, at his http://vixandmore.blogspot.com/2009/12/new-dr-brett-series-on-lessons-for.html
This is a MUST READ. Consider it the best holiday gift you can give to (and invest in) yourself!

Insightful markets analysis - articles and audio - for a very interesting holiday weekend

We'll have an interesting weekend including taking a look at what some others are seeing and saying on the markets. Recently there have been a number of views and items pointed out, such as mutual funds' low amounts of cash (bearish), investors feeling anxious (bullish), TRIN popped high (bullish), ISEE popped high (bearish). This is all fodder for analysts so here's an overview of some (through the weekend will add more here, to avoid a multiplicity of posts):

ADDED -

Terry Laundry's T Theory Observations. At http://www.ttheory.com/

Here's his intro statement:

Update for Sunday November 29 2009. Today covers many longer range topics that help to answer the shorter term T Theory forecast which remains very bullish. Look at the 3 chart PDF files below then listen to the 4 Audio commentaries that follow.

Long Range Ts Chart Download ADTSCurrent ; Chart Download ADT13 with first Echo091127 ;

Chart Download FAGIX vs GOLD YTD091127

Audio Commentary on Long Range Ts Download TTO20091129A

Audio Commentary on 8 Year Cycle Download TTO20091129B

Audio Commentary on First Echo Analysis Download TTO20091129C

Audio Commentary on Sector Benchmarks Download TTO20091129D

ADDED - Fall Down Friday - Dubai Cruel World! | Phil’s Stock World - By Philip Davis at his site, http://www.philstockworld.com/2009/11/27/fall-down-friday-dubai-cruel-world/. I'm actually not a member there but if you're daytrading the ES or options you probably should consider it.

ADDED - http://www.schaeffersresearch.com/commentary/observations.aspx?ID=96511. Here's their intro paragraph:

News of credit trouble out of Dubai shattered the quiet of the holiday-shortened week on Friday, ending the Dow Jones Industrial Average (DJIA) winning streak at three weeks. Looking ahead, Ryan Detrick, Senior Technical Strategist (filling in for Todd Salamone due to the holiday), makes the case for a continued run higher by the bulls, although he acknowledges some short-term technical hurdles. Ryan's contrarian mindset is cheered by the continued skepticism in the face of the huge bull run of 2009. Next, Senior Quantitative Analyst Rocky White takes a closer look at the overall performance of the S&P 500 Index (SPX) following the release of Black Friday's sales data. Finally, we wrap up with a look at some key economic and earnings reports slated for release this week.

An article by Bill Mitchell, at his billy blog » Blog Archive » Dubai is not a case of sovereign default - http://bilbo.economicoutlook.net/blog/?p=6358.

SP500 High at Fifty Percent Time and Price Cycles - PTV-Investing.com, Gann analysis by Andy Askey

http://ptv-investing.com/blog/2009/11/17/sp500-high-fifty-percent-time-price-cycles/. Here's just a quote, you'll want to see Andy's full work there:

The SP500 index hit the 50/50 point and is in equilibrium – no advantage to either side. Dynamic Chart

Andy Askey's additional post, ValueLine Arithmetic Square of 90 - PTV-Investing.com, at http://ptv-investing.com/blog/2009/11/26/valueline-arithmetic-square-of-90/. Here's a quote from this one too:

The ValueLine Arithmetic (VLE) Square of 90using trading days shows price 180 TD beyond the March low. Interesting that the left shoulder of the head-and-shoulders formation occurred 45 days into the second 90 day cycle, the head at the 3/4 time line, and the shoulder finished at the 180 day mark. A new high would negate the H&S but I would not be surprised to see price drop throughout December.

The VLE swing chart show topping action during the past month. Also note that the high was within one percent of 8 complete square of 9 cycles from the March low. This is another reason not to be surprised if the high is in.

ISEE Red Candles - Slope Of Hope with Tim Knight, with a variety of interesting charts and points, at http://slopeofhope.com/2009/11/isee-red-candles.html.

VIX and More: Chart of the Week: No More Free Lunch for Volatility Sellers? by Bill Luby, at http://vixandmore.blogspot.com/2009/11/chart-of-week-no-more-free-lunch-for.html.

I came across information on this trading book: - not one I've seen but here's the recommendation I read, so it might be worth keeping an eye out for it:

"One of the best trading text book written in my opinion is (Aerodynamic Trading) by Mrs. Constance M. Brown. She is an experienced Elliott Wave trader, she worked in the industry for many years. Goal setting, Psychological Tactics, and The Three selves and Competition and Winning sections are worth the cost of her book alone. Intuition section is awesome... Courage to make the trade ect... The book is a must for anyone who is dead serious about winning at this high stakes game.

"She also talks about The Dark Side of Trading.... Fear of Success, Fear of Failure etc... The text book is 304 pages long. Its out of print, so you must search old books.... the book's value has really increased."

Also, this is an audio I just came across and haven't been able to listen to yet but have been told is
interesting especially for Elliott Wave'rs - by Ed Handley 11/24 at WDMV Program Schedule: http://www.dcradio700.com/schedule.html.

Several interesting chart-based technical analysis posts based on SPX
analysis, at Cobra's Market View: http://cobrasmarketview.blogspot.com/.

China Meltdown | Charts and Coffee Blog - http://www.chartsandcoffee.com/2009/11/china-meltdown/.

This article is interesting for background (we still trade on
technicals, especially for timing): Gold Market | How and Why China Will Flood the Gold Market - Contrarian Stock Market Investing News - Featuring Bargain Stocks, at http://www.contrarianprofits.com/articles/how-and-why-china-will-flood-the-gold-market/21149.

Safe Haven | Yen's Perfect Storm, by Ashraf Laidi, 11/27 - http://www.safehaven.com/article-15131.htm.

Financial Sense Newshour with Jim Puplava - Looks like they taped on Thursday. This weekend's featured technician is Dow Theorist and cycles analyst, Tim Wood of Cycles News & Viewshttp://www.financialsense.com/fsn/main.php.

Safe Haven | Technical Market Report, by Mike Burk, at http://www.safehaven.com/article-15138.htm. A quote from his intro, though you'll want to read it all:

One of my programs reported 0% volume of advancing issues and 100% volume of declining issues for the components of the DJIA, S&P 100 (OEX) and SPX. 100% of the issues in the DJIA declined on Friday while 99% of the issues in the OEX and SPX declined on Friday. The 1% of advancing issues in the OEX and SPX must have accounted for less than 0.5% of all of the volume of the component issues in those indices. This phenomenon was not expressed in the small caps. In the R2K "only" 88% of the volume went to declining issues.

Weekend lineup of what other analysts are seeing and saying on stock markets, gold, and more

We've got another good lineup of links to articles by talented analysts and technicians. There wil be a few more added on Sunday but this is already a great start!

Added 11/22, 2:32 pm: Global Markets in Review: Share Prices Too Far Ahead of Economic Reality -- Seeking Alpha - By Prieur de Plessis, with a great overview of asset classes, charts and indicators, the sugnificance of short-term T-bills going negative, and even quoting Richard Russell on the bearishness of valuations. At http://seekingalpha.com/article/174683-global-markets-in-review-share-prices-too-far-ahead-of-economic-reality.

", 8:48 am: A choppy ride near-term is what Todd Salamone projects, at http://www.schaeffersresearch.com/commentary/observations.aspx?ID=96420. Here's their introduction:

Monday Morning Outlook: Post-Expiration Week Hangover Possible
SPX continues to struggle with technical resistance
Last week was a hollow win for Wall Street bulls. The Dow Jones Industrial Average (DJIA) managed to extend its winning streak to three weeks in a row, but the S&P 500 Index failed to overcome a key technical hurdle in the 1,120 region. A mix of lackluster corporate reports and worrisome economic data proved less than helpful for stocks during a week that is historically bullish. Looking ahead, Todd Salamone, Senior Vice President of Research, sees mean-reversion and coma-like price action for the market, as equities deal with post-expiration week headwinds. Todd also zeroes in on the falling 50-day buy-to-open put/call volume ratio for the S&P Depository Receipts (SPY) and considers what impact it may have on the market. Next, Senior Quantitative Analyst Rocky White mines technical performance for gold and the gold-priced DJIA. Finally, we wrap up with a look at some key economic and earnings reports slated for release this week.

Safe Haven | Technical Market Report. By Mike Burk, at http://www.safehaven.com/article-15086.htm.

SP500 High at Fifty Percent Time and Price Cycles - PTV-Investing.com. Additional Gann analysis by Andy Askey at http://ptv-investing.com/blog/2009/11/17/sp500-high-fifty-percent-time-price-cycles/.

Next low in Spring, then retest high in August? - Weekend Outlook – 15Nov09 - PTV-Investing.com; By Andy Askey at his Gann analysis site, http://ptv-investing.com/blog/2009/11/15/weekend-outlook-15nov09/.

Look out for the TED spread! Check out this article, Goldman Ire
Moving to Mainstream Media & TED Spread | Charts and Coffee Blog - at http://www.chartsandcoffee.com/2009/11/goldman-ire-moving-to-mainstream-media-ted-spread/.

Time Determines S&P Turning Point-Minyanville - A free article by Jeffrey Cooper that discusses time, price and Gann. (Hmmm, it is interesting that some indices topped in October, 2 years after the 2007 peak, and others this month 1 year from the November 2008 lows.) An interesting range of thoughts; at http://www.minyanville.com/articles/jeffrey-cooper-s%26p-rally-bulls-bears-minyanville/index/a/25532.

This weekend, Tim Wood provided his article "The Rally Lives On" with his Dow Theory observations and comments as the featured Market
Observation at both Safe Haven, and also at FinancialSense.com, http://www.financialsense.com/. And Steven Hochberg of Elliott Wave International is the technician in this weekend's audio financial news-hour at Financial Sense.

Safe Haven | Gold: A "Channel Buster" or a Runaway Parabola? - By Clif Drok (who's also just published a book, "The Stock Market Cycles"), posted at http://www.safehaven.com/article-15088.htm

Here's a quote:

The gold stocks have ridden on the back of the gold rally, which in itself is partly the result of the high level of fear surrounding the economic outlook. Contrary to popular belief, gold tends to perform well in periods of economic weakness and is especially bolstered during the hyper deflationary leg of the K Wave. Deflation can best be seen in the contraction in consumer credit outstanding on both an actual as well as a percentage change basis, as shown in the following chart.

Options Trader Friday Outlook: Is Goldman Sachs Stupid, Or Evil? -- Seeking Alpha - By Philip Davis - something to read especially if you still trust in sell-side "fundamental analysis": http://seekingalpha.com/article/174528-options-trader-friday-outlook-is-goldman-sachs-stupid-or-evil.

Options Trader Wednesday Outlook: 10,500 or Bust! -- Seeking Alpha - By Philip Davis - interesting suggestions about the bigger picture in equities, dollar and oil, even though this article was focused on the near-term options positions: http://seekingalpha.com/article/174038-options-trader-wednesday-outlook-10-500-or-bust.

Dow Theory confirmation by transports of industrials' new high is buy signal, but indicators continue to warn

A reader asked a day or so ago about Dow Theory giving a confirmation buy and I've finally looked into it. Below you'll see the transports' daily chart using line style (not candlesticks) making it easier to see with day-closing data that it edged a slightly higher high at the beginning of this week. Tim Wood is the Dow Theory expert I pay attention to - he's the technician whose "Cycles News and Views" site is in the other sites of interest listed at the right side of the page here. Here's what he's said about it:

The price action on Monday carried the Transports to a closing high of 4,046.50, which surpasses the previous closing high of October 20th at 4,045.11. As a result, the short-term Dow theory non-confirmation has been mended and on Tuesday the Transports made yet another recovery closing high. From a Dow theory perspective the averages are again in gear with each other to the upside.

So it's possible to view the confirmation as a "buy" for the continued move up. I'm okay if anyone wants to buy these indices on this basis. Just keep a close stop to protect against losing support. Because the past two days were weaker, though can be just consolidation before another push up. But again, will the signal have lasting effect? Anyone buying on the signal won't want to see today's lows violated. The other technical backdrop indicators have been weakening, so whether or not buying or adding to longs, you want to remain cautious here. If you're following the posts about indicators here lately, you know that the indicators such as the advance/decline data haven't yet confirmed the indices are ready to sustain the rally longer.

For that matter, despite the transports' daily chart indicators currently in synch with the move up from early November, look at the weekly chart's negative divergence in the StochRSI indicator. And if the transports push much higher, there's substantial overhead price resistance from the 2007/208 lows.

So, I'm not poo-pooing the Dow Theory confirmation. Just saying it confirms the rally isn't over yet - and doesn't change the fact that we're at a juncture where equities may turn quite soon as suggested by market internals as well as Dow Theory's younger brother, Elliott Wave theory.

Think Dow Theory supports the equities markets having defeated bearish probabilities? Think again, says Dow Theorist Tim Wood

Dow Theory is Elliott Wave's precursor, and whenever I want to know what it's saying I only trust Tim Wood. He analyzes it rigorously in addition to his Cycles News and Views (see his site by that name in the list at right). Tim has posted another free look on this, in Market Observation - Tim W. Wood 11.06.2009, at http://www.financialsense.com/Market/wrapup.htm. Here's a quote to spur your interest:

With Dow theory, it is the joint movement of the Industrials and the Transports above and below previous secondary high and low points that matters. How much a previous secondary high or low point is penetrated is immaterial from a pure Dow theory perspective. Sure, we can argue that the greater the penetration the stronger the move, but from a pure Dow theory perspective, penetration by a fraction of a point is as good as penetration by 1 point, 100 points or even more. Now, Robert Rhea, the great Dow theorist of the 1930's did say that he preferred to see "penetration with velocity." By that he meant increased volume.

I don't know about you, but I'm concerned about the volumes in this rally - they never looked robust enough to convince me we've gotten past the worst. And the recent slide has seen an uptick in selling volumes - one of the bearish signs.

Bottom line is that Dow Theory agrees that the rally is a bear-market rally and won't prevent another slide lower when the time is right.

Weekend review for reading up on T Theory and other technical/sentiment analysis, and how to consider when trading equities

For weekend reading, I posted a reference to Bill Luby's recent article about VIX that was at Seeking Alpha, which I posted at my UBTNB3 blog (link at site link & feed at right). Bill Luby maintains his VIX and More blogspot chock full of info on VIX and related matters, so I keep his site in the sites list at the right side of the page. I'll also note that the EWI folks remain in their point of view that we're going into a massive third wave down that will be even more crushing for equities and other asset classes - whereas Tony Caldaro with his Objective Elliott Wave (as posted here yesterday, from his Elliott Wave Lives On site, also with link at right) foresees a "C" wave down that won't go as low; and besides, we're probably getting ready for a 4th wave consolidation or correction upward before it even finishes its 5th wave of its wave one. Well I don't want to dwell on Elliott Wave theory right now - just want to remind readers we've got the context of some competing viewpoints and remain sifting for the most likely path of what's yet to come. Among the weekend reading we recommend, here are two constants.

One of course is Terry Laundry's T Theory. He's now added daily updates too, which is a real good addition. Even if you don't check in there daily, however, you'll want to check out his weekly update with charts and audio commentaries, at his T Theory site (also always in the list at right). Here's a quote from his main page, but this doesn't have the live links, so click the link above (or in the list at right) to get there and follow his links to his charts and commentaries:

For end of day updates go to this link T Theory Foundation then to the Calculation page for the chart/data and my short daily comment about 6:30PM ET.

Update for Saturday October 31 2009 For today's discussion we have two charts below; the first for the near term outlook using my regular daily charts, the second for the longer term Ts. See these charts or download them if you wish, then listen to my audio commentary, part A for the first chart, part B for the long term chart. Helpful Hint for Windows users; I have been told that if you are not getting the audio stream to work for you, right click on the audio link and it will download the audio file to your computer, after which you can play it. Daily Updates will continue at the Foundation site as noted above.

Daily Chart Download SRT20091030
Audio Commentary for the Daily Chart above Download TTO20091031A
Longer Range T Chart for Bond Fund and China Fund Download FAGIX vs MCHFX abcdTs
Audio Commentary for the Fund Chart above Download TTO20091031B

I also continue to recommend reading this weekend's Schaeffer's Monday Morning Outlook: Long-Term Uptrend Intact, But Risks Lie Ahead. Here's the quote from their intro so you can see what technicians Todd Salamone and Rocky White are addressing now in terms of sentiment and technical indicators regarding equities and the dollar:

The Dow Jones Industrial Average (DJIA) once again played tag with the 10,000 mark last week, but headed sharply lower as the weekend drew nearer. Still, the Dow did manage to outperform its major counterparts for October, carving out a gain of 0.01% versus the S&P 500 Index's (SPX) loss of 2% and the Nasdaq Composite's (COMP) drop of 3.6%. The market remains rife with concerns, and Todd Salamone, Senior Vice President of Research, zeroes in on several of these potential hurdles in this week's commentary. In addition, Todd takes a closer look at put/call ratios for the SPX and the CBOE Market Volatility Index's (VIX) massive spike to close out the week. Next, Senior Quantitative Analyst Rocky White takes a look at the U.S. dollar, the massive amount of skepticism that has been directed toward the greenback lately, and the potential impact of this sentiment reading. Finally, we wrap up with a look at some key economic and earnings reports slated for release this week.

Personally I think they should spend a bit more time also analyzing the relative underperformance of the Nasdaq, but it's stll good and interesting technical information they present.

From the swing trader perspective, the decision tree is largely this: either we're going down for a real big drop to last at least a couple more month or longer. Or we go further down for a moderate drop, then have a possibility of seeing equities to higher levels. I'm grossly oversimplifying, but for a reason. Near-term turbulence aside, we're more like to see equities drop lower into mid-/late November, without new highs first. So investors and slow (KI$$) swing traders should maintain the attitude of selling rallies, shorting equities and/or staying in cash, until either (1) we identify the completion of the first wave of "C" completed (maybe at SPX 1022? - just guessing!), or (2) if you're really a slow trader, we identify the entire "C" wave down complete (maybe around SPX 866 or lower? - just guessing!), or (3) we're proven wrong and equities push to new rally highs (we're really not expecting this but it's to protect just in case, ya know!).

Shorter-term active traders will still want to follow the waves with wave counts, trendlines, cycles probabilities and levels. Just recognize the obvious - volatility has increased - and respect it with measures like reduced position size, trading only when very clear on your setup, doing TMAR on half when first objectives are met and tightening stop on the rest, being sure to stop out when wrong, etc. Mostly the discipline you should always be using, but with heightened alertness now.

UPDATE: Tim Wood of Cycles News & Views (site included in my list at right) is the featured technician this weekend in the 1st hour of FinancialSense.com Newshour with Jim Puplava. Tim tracks financial markets expertly with cycles, McClellan and other technical indicators; and is also the only Dow Theorist I trust. So it's worth a listen.

ADDITIONAL UPDATE: Also check out Mike Burk's Technical Market Report at Safe Haven: http://www.safehaven.com/article-14893.htm.

Dow Theory - Elliott Wave's "older brother" - says bear market will resume for next phase down: Tim Wood

Dow Theorist and cycles analyst Tim Wood (whose Cycles News & Views site is in my list at right) has penned some update thought on how to view equities and gold now, in Market Observation - Tim W. Wood 10.23.2009 at http://www.financialsense.com/Market/wrapup.htm. R.N. Elliott was aware of Dow Theory and essentially expanded on it quite a bit in developing Elliott Wave theory back in the 1930's. This is an interesting topic because of the big picture. Tim Wood points out that in Dow Theory, as confirmed by Richard Russell, we've only seen the first phase of the bear market, with the second and deeper phase yet to come. He's got some additional data points to go along with his assertions - so here's a quote (use the above link for the full article):

From a value perspective, history shows that the dividend yield and the P/E will be roughly at par at true bear market bottoms. As an example, I show that the yield on the S&P at the 1932 low was 10.5 with a P/E just under 10. At the 1942 low the yield was 8.71 with a P/E of 7.3. At the 1974 bear market bottom I show the yield on the S&P to have been at 5.9 with a P/E of 7.24. Even at the 1982 low the yield was 6.2 with a P/E of 6.9. At the March 2009 low I show the yield on the S&P to have been at 3.58 with a P/E of 24, which has historically been considered overvalued. At present, I show the yield on the S&P to be 1.99 with a P/E of 144.83. Yes, that is right. The current P/E, based on Generally Accepted Accounting Principle, is one hundred forty four. The historical P/E ratios at the previous lows were also calculated using Generally Accepted Accounting Principles, so these numbers are consistent. If you are seeing any other number showing much lower P/E's it is because it is a George Orwellian phony bologna calculation. If the S&P were to trade with a GAAP P/E of 20, which has historically been considered overvalued, it would be at 150. If the S&P were to trade with a P/E of 15, which has historically been considered to be fair value, it would trade at 113. My point here is that at the March low the P/E and the yield were no where near par and thus the market did not reach levels in which true secular bear market bottoms are made. Plus, with the spread between the current P/E and the yield at an historic 142, the market is grossly overvalued. This will ultimately be corrected with the Phase II and Phase III declines. If you have not read my article on Bull and Bear market phasing I urge you to read the August 14th Market Observation.

How a Dow Theorist and cycles technician views the equities rally in historical phasing: Tim Wood's update

Tim Wood of Cycles News & Views (site always included in the other sites of interest at the right side of the page here) has issued another public update about his views of the equities rally. Since he's an accomplished cycles technician, as well as classical Dow Theorist, I pay attention. This is only a quote, so you'll want to read the whole article at Bear Market Phasing (FinancialSense.com, 8/14/2009):

It seems that everyone is pretty well convinced that we are now operating within the context of a “new bull market.” Rally, yes, but, “new bull market,” I think not. Let me clarify my position on this advance. I told subscribers in my March research letter, before the March low was made, that price was moving into an intermediate-term low and that once this low was made a more meaningful bear market advance should unfold. I specifically stated that this rally would not be something I would be willing to sit on my shorts through and that the advance out of this expected low would be a meaningful trading event. It was then, the week of March 13th, that my intermediate-term Cycle Turn Indicator triggered an intermediate-term buy signal. That signal remained intact until the week of June 19th. It was then the week of July 17th that another intermediate-term buy was given by the intermediate-term Cycle Turn Indicator. The key now is to follow this indicator until it turns back down and then to monitor the developments surrounding that downturn for clues as to whether the advance is finally over, or if we are merely seeing another buying opportunity within the context of this ongoing bear market rally. The point I want to make clear here is that we did foresee this advance, and that as of this writing it is still intact. But when we back up and look at the bigger picture, I maintain that this is a bear market rally.

According to Dow theory, each bull and bear market period has three separate phases. This phasing is an important aspect of the Dow theory that is most often overlooked. I have spoken in the past about this phasing and today I want to address this topic again.

Just so you know, while Tim couches his discussion in this public update by comparing to the markets of the 1960's-1970's, his subscription analysis has also been providing an in-depth review and comparison to the market movements of the Great Depression-era 1930's too.

Bottom line though, his outlook for swing position type purposes is very measured on the basis of his indicators, especially his cycle turn indicator. He always points out that his cycle turn indicator is the main guide he uses for trading/investing purposes.

Thoughts for KI$$ traders; or, "ask me no questions and I'll tell you no Fibs" (Fibonacci levels) on the S&P 500

Here are 3 charts of the S&P 500 (SPX), that you can reference as part of reviewing the analyses presented here in previous posts this weekend. And a quick note for KI$$ traders/investors - since the whole idea of KI$$ (Keeping It Simple or Slow for ca$h trader$/investor$) is to use clear signals for buy/hold/sell decisions with cash accounts. (Or for any swing trader who likes to keep it simple.) If you know how to read the indicators, you know that the SPX has been confirming the bullish mode that price has been displaying. The level that we're interested in now is marked at the area or range around 1014 to 1018 (it can go up to 1020 or perhaps 1022 but no guarantee). We're going to see one of 3 things: either the market will soon close down underneath the low of the most recent swing high - that will be a sell signal which we will so state in a post here (probably even quicker via Twitter). This is the one that looks increasingly likely - check out the monthly chart, see the levels we just hit at 1018 with the 200-month moving average (right when the Nasdaq Composite is hitting its 89-week exponential moving average.)

Second, it could just consolidate sideways for a while - I would only see that as possible if the Elliott Wave pattern hasn't completed the last fifth wave up for this part of the rally. Meaning, if there is some consolidation, I don't really believe it would last very long.

Or, it will just continue marching up to 1053 - unlikely but theoretically possible. What's more likely to be the puzzle for us to figure out will be, assuming we get the pullback, is how deep it goes and whether it will get support (at Andre's 940 or Tony's 935, perhaps??) and then move up again.

What I'm trying to suggest - without making "trading recommendations" - is that if we see a trigger bar sell as I described above, then a valid KI$$ approach is to cash out longs and consider short or defensive positions if you're a short-term trader. Others might go into cash and look for the next opportunity - be patient in case it takes a week or so.

By the way - Dow Theory says that the Transports just joined the Industrials in a buy signal by going above the January highs, on Friday. Yes, it is true! That doesn't tell us there won't be a pullback, however. Instead, it belongs on the "bullish" column in the "bulls vs. bears" debate that the market's caught between now.

Here's the daily chart - stochastics look ready to turn down, MACD not far behind; if Monday closes under Friday's low it will look bearish. There's the FOMC on Wednesday ... I don't know if most KI$$ traders want to assume the FOMC will push the markets right up again if there's significant weakness Monday/Tuesday. We can look to see if the SPX drops under the key support level that Andre mentioned in his update, posted earlier this evening (prior post).

Here's the SPX weekly chart - this is the one showing that the SPX just retraced 38.2% of the drop from 2007 highs:

Here's the SPX monthly chart - This shows the SPX touched its 200-month moving average on Friday, at 1018. I know it looks like there's a fork trendline a bit higher it could reach - and yes, that remains theoretically possible - we'll just have to see if the markets have what it takes to also get the QQQQ's above their 50% retracement and all the other factors I mentioned earlier this weekend.

But oh yes - I mainly wanted to post these as images to go along with all those analyses, so here it is:

(click on any chart to see it larger/more clearly)

ChartsEdge weekly forecasts for equities and gold for the week of July 27; and some comments on Dow Theory

Here are the ChartsEdge weekly forecast charts for equities and gold. Again, for those not familiar with these, check out the information at the ChartsEdge site (always in other sites of interest listed at right) or their information that I've included at my No Bull No Bear No Bias blogspot (links at right also). As I understand things (based also on other cycles analysts I review), there may be a trading cycle cresting this week. Much of the art of cycles analysis involves determining how the interaction of short-term, intermediate-term, and long-term cycles interact and either reinforce or mute one another, to result in actual price levels being relatively higher and lower.

Speaking of which, there's that point about Dow Theory and I may as well mention it here! Here's the real deal: the Dow Industrials closed above their January daily closing high, and that's the one to focus on as the prior secondary high point (not the June high). That means we do have the potential for a more bullish signal coming from Dow Theory. But, there is no such signal unless and until the Dow Transports confirm by doing the same. Also, if the Dow Transports do the same, then it would not signal a bull market, but would only signal a stronger cyclical bull within the much larger, secular bear market.

Okay - just had to point that out! Also those are just my own comments above, and not those of ChartsEdge. Without further ado, here are the charts for the week ahead, from ChartsEdge:
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ChartsEdge (U.S. equities) map for 7/24; and some comments

ChartsEdge Market Map for 7/24

Author: Mike Korell
ChartsEdge Daily Maps


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Thanks again, Mike and ChartsEdge!

Folks - a reader asked about these, and I responded, both in the comments to yesterday's daily map. So if you are not already familiar with these, then please read those comments, and also the information at the ChartsEdge site about these (must of which I've also posted at my NB3 education site) (links for all these, at the right side of the page here).

I checked on Dow Theory last night - turns out it uses closing levels. So the Dow Industrials' high close to beat is 9034, and the Dow Transports is (about) 3701 (I'm going from memory on that one). So the Dow Industrials need to beat that on a closing basis; and then, in order to get a confirmation, the Dow Transports have to do the same. If and when it happens, we'll post that information of course.

Dow Theory reminds us to stay bearish unless the Dow betters its January high (and now, the lower June high is resistance); also market cycles views

Here's a way to look at the basics of the equity market "big picture" now (especially with my charts at the bottom of this post). And, students of market cycles, take note: Financial Sense Newshour this weekend is featuring cycles, including having Tim Wood as the advisory technician during the first audio segment (and there's another cycles analyst featured during the second audio segment, Stephen J. Puetz, author of "The Unified Cycle Theory: How Cycles Dominate the Structure of the Universe and Influence Life on Earth" including electromagnetic influences) - at FinancialSense.com weekend audio. UPDATE - Schaeffer's Research has issued their Monday Morning Outlook: Traders Raising the Bar for Earnings, Economic News -SPX breaches one support level; others at risk, by Todd Salamone (7/12/09). As Schaeffer's summarizes this article:

The initial excitement about a potential second stimulus package evaporated when Wall Street realized that the need for such a package might mean that the U.S. economy is further away from a second-half rebound than originally thought. Confirming those fears, last week was riddled with shaky economic data, which helped to overshadow the emergence of a major Detroit automaker from bankruptcy protection. Looking ahead to next week, Todd Salamone, Senior Vice President of Research, examines support and resistance levels for the S&P 500 Index (SPX), as well as potential concerns on the sentiment front and the SPX's 20-day historical volatility. Then, Senior Quantitative Analyst Rocky White takes a closer look at Bollinger Bands, the SPX's current 80-day streak of trading between them, and what an eventual breakout in one direction or another could mean for the market. We wrap up with a look at some key economic and earnings reports slated for release this week. Continue reading...

Tim Wood featured at FinancialSense is the cycles master who also applies Dow Theory, McClellan Oscillator and other technical indicators in his coverage of stock indices, gold, oil, bonds and the dollar at Cycles News and Views (link in the other sites of interest at the right side of the page here). He occasionally posts public articles at Financial Sense (he's the one I mention because I consider his work consistently reliable), and this audio feature at FinancialSense.com weekend audio is another way for non-subscribers to get a glimpse into - listen to - what he is seeing.

Now Bud, this one is for you! You challenged me to make one clear-stated explanation why we should be bearish. One of the plain and simple points that I will borrow from Tim Wood is, as Tim repeatedly states to explain being bearish, is also based on classic, good old-fashioned Dow Theory. Specifically, that the Dow Jones Industrial Average (the Dow) remains in bearish mode so long as it remains under its January high! Despite all the conflicting information out there, this fact is simple, clear and important - the Dow has never yet pushed above the highest point it reached in January, half a year ago. In fact, that is true not only for the standard Dow (Dow Industrials), but even for the Dow transports.

Notice that the Dow high last month did not go above the Dow January high. And now, the Dow even has to go above its June high to give some hope of being bullish again! So keep your eye on that - the Dow must be viewed as a "sell" unless and until:
1. if it can get above last month (June) high
2. AND then, above the high of 6 months ago, back in January.

The basic rule is that bearish is lower lows and lower highs. After the high of January, the Dow plunged to a new low at about 6469. The only thing that can break the cycle of lower highs and lower lows, is a higher high - higher than January in the Dow. So unless and until that happens, it remains bearish and another new low remains possible.

It is possible to make the analysis more complicated. But that really is not necessary, and can be too distracting. Actions speak louder than words. So we will let the Dow prove to us whether - or not - it can make these higher highs. And meantime we will remain bearish (especially if the Dow loses the 8,000 level, and then doesn't get back over 9,000).

Here are my two charts - the first a daily chart to illustrate the basic point of Dow Theory; the next a monthly chart with 20 years of the Dow to show graphically the tenuous position it is in (click on an image to see it larger/more clearly):

Factors to consider for the bull vs. bear equities market analysis after the drop late last week

Bull vs. bear? Keeping in mind that even the bullish case can factor in a pullback, so will it be "only a pullback" or something worse? That's what analysts are looking at this weekend, after the large drop Thursday (and small followthrough Friday in overseas markets like the German DAX (see DAX daily at right). Notice that the DAX doesn't look like it's violating support quite yet, as it touched to its 200-day moving average and the StochRSI isn't below 0.2 (though it is under 0.5). It can have done a wave 2 down of the larger Minor 3 down that Tony indicates for the SPX, and we may see a move up in its corresponding wave 2 tomorrow (with StochRSI testing back up to 0.5), before rolling over and down in wave 3 of Minor 3 (if that's the "right count" for the DAX). Will Monday be a good selling opportunity, without another good buying opportunity for weeks or months? Or will it be something else? Let's take a look at significant factors to consider in deciding what a decline in the markets may mean for swing traders and the bigger picture.

Factors to consider include:

- The "head and shoulders" idea that would have the markets pointed to about 850 in the SPX. One idea is that a pullback to about that level would form the right shoulder of a "bullish inverse (reverse) head and shoulders" pointing the markets up again. If that proves to be the case, it will be consistent with the interim "B" wave down scenario that Tony Caldaro shows for the Dow (and that, independently, Andre Gratian shows as a possibility as well). If this is the case, we'll see it with the wave characteristics and the technicals.

- Todd Salamone and his colleages at Schaeffer's Research have issued their Monday Morning Outlook: Summer Continues to Look Like a Trading Range (7/5/09) which deserves a read, in preparation for the upcoming week. They state in their preview: "Todd Salamone, Senior Vice President of Research, examines support and resistance levels for the S&P 500 Index (SPX), as well as the current impact of the CBOE Market Volatility Index (VIX). Then, Senior Quantitative Analyst Rocky White takes a closer look at quarterly seasonality, and what historical data might say about third-quarter performance for Wall Street. We wrap up with a look at some key economic and earnings reports slated for release this week."

- If the bulls think this is only a pullback down, they'll be looking for a retracement level that might be similar to the 850 SPX level, or just as likely to be according to the Fibonacci retracement levels in the chart below. Going deeper than 760 - which I consider a pivot, and it's also just under the .618 retrace level of 777.36 on the chart below - should be a warning sign that the markets are heading much lower.



- The SPX hit resistance at a downtrend line from the 2008 swing highs, which some (such as Allan at his AllAllan blogspot) are showing at the trendline where an EW wave 4 may have completed and point us to a wave 5 down. That idea would be consistent with my own ideas, especially for the SPX doing a large "C" wave down; and may also be consistent with the EW count that Andre Gratian tends to favor.

- The VIX touched to 24.80 which is close enough to that .786 retracement level I've kept in mind for months now - even though it poked under the uptrend line on my weekly chart - so the VIX may have bottomed out. Keep in mind three things: it may still need to actually test 24.78, even by poking under it for a day and then reversing upward again - not a guarantee, but theoretically possible. For that matter, the VIX hasn't yet made a new swing high, or gone above the 33.81 level that was the prior Fibonacci pivot. Also, it remains possible for a negative divergence to appear with equities pushing higher into mid-July while VIX makes a higher low. This could even happen with the Nasdaq pushing higher (perhaps with the Nasdaq Composite to 1912) while the Dow Jones Industrial Average and the SPX make lower highs.

- Speaking of mid-July, there's the Bradley model with a significant turning time window July 14-15. That can be either a high or a low in Bradley model terms. (There's recent research presented by Manfred Zimmel at his amanita website indicating that the Bradley is tracking with oil better than equities in the current time frame - although in response, we might consider that having the energy complex drop might be the factor that helps the broader markets drop during the Bradley declining time frame into November.)

- Dow Theory says that the markets remain in a bear market since neither the Industrials nor the Transports have bettered their secondary high point which was the January highs.

- The bear market has now in its 20th month. Often a bear market of this level takes at least 33 months, as documented by some technicians including Martin Armstrong. So there is reason to believe that we're only about 2/3 of the way through the bear market. This doesn't mean the bear market rally cannot go higher, but it does mean we must brace for the likelihood that it isn't over by any means.

- Robert McHugh is on yesterday's audio discussion at FinancialSense.com weekend audio, discussion his technical analysis that he says indicates very large "head and shoulders" topping patterns (must be on the monthly, rather than daily charts) in certain foreign stock markets. Further, he says these markets are indicated to go "almost to zero" based on his technical analysis. Folks - sometimes McHugh gets it right, and sometimes not - I'm not going to point readers in his direction. All I'm saying is that he's out there with a very bold prediction so it's something that we can keep in mind and try to test on our own. I've posted a monthly chart of the DAX below (I think it's one of the indices he mentioned in that audio, I listed to it last night). I bet some of my readers will think the same as I on looking at it - if it isn't a large EW flat, or the beginning of a zigzag down, then it could also be the opening part of a very large ending diagonal triangle with a couple more large zigzags up into two more new highs interrupted by a deep zigzag low in between. Will see, I haven't been able to more fully analyze it (looking at whatever count Tony Caldaro has for it would be good too); it does at least look like a possible double top.

- The Elliott Wave analysis is very sobering and as summed up well by Tony Caldaro in his weekend update (also posted here yesterday), several markets have already confirmed downtrends and the SPX looks like it may do the same soon.

- The SPX found resistance almost directly on the .382 Fibonacci retracement to 2008 swing high that I've been showing on my weekly chart since early this year, and the indicators on the weekly chart have also documented the loss of momentum. The McClellan Oscillator fell back from the trendline I've marked onto it, and even the Summation Index has definitely weakened.

- Terry Laundry posted today at his T Theory website that his idea of a new, bullish "T" has not confirmed yet. I know that Terry Laundry's T Theory has been telling him there should be a new bullish "T" in the making, but as he acknowledged today, it hasn't confirmed yet. I'm concerned about three things there - one is that his oscillator may be subject to the same issue as we've documented in the McClellan Oscillator, that there's a declining pattern that it may not be able to break above at this time. The other is that his theory rests on a cash buildup phase that precedes and then turns into an equities accumulation (bullish) phase for the rally of the next side of the new "T". But, the "cash buildup" during 2008 as the markets dropped, was also the deleveraging and popping of a credit bubble. That may mean there really isn't enough cash to put to work in a new bull phase. Yes, people talk about a lot of cash on the sidelines - I haven't yet seen charts that prove it, and the long-wave cycle theory states that any such buildup of cash is more likely to be hoarded and/or used to pay down debt rather than being risked in equities for a while longer.
The other concern I've begun to have about the idea of a new "T" is that the point of measurement might be not quite right. It's an idea I started to have based on what looked like a typo on my GS chart. (Wasn't a typo, it was my way of abbreviating "TCZ", but gave me a good idea nonetheless.) Many markets including Nasdaq and stocks including GS bottomed in late 2008, and did not make a new bottom in March. If you look at the time frames and chart patterns, well, it looks to my eye that we are have already just finished the right-most edge of a "T" that would have bottomed in late 2008.

- For those who, like me, enjoy looking at long-wave cycle charts, you should also check out Terry Laundry's "megaband" T Theory Super Cycles chart today at his T Theory website. It goes back to slightly before 1800 and charts out a 40-year oscillator cycle. He still has a statement on there that "T Theory expects the next low Zone in the 2010-2020 period. And the oscillator has been testing the 40-year support level. So you'll want to see that, as well as listen to his audio comments that go along with it.

- I've posted below my monthly and weekly SPX charts, as well as a monthly chart of the DAX which I think is one of the indicates that McHugh was talking about. I'm not seeing the DAX as a classic head and shoulders on the very big monthly chart, but I could see it working out a large "flat" ABC similar to one of the theories I've got on the SPX. For our purposes, suffice it to say that these equities indices do face challenges.

But I've gotta run for now, I see I've got the ChartsEdge forecasts to post and then I plan to go boating (when I can fit it in, I also want to read Tim Wood's new July indepth cycles letter - sorry I cannot share it, it's for subscribers only, but it does inform my overall thinking of course). Then I'll also be looking forward to Andre Gratian's newsletter to "put it all together" later this afternoon. I'm not sure I was able to cover every single significant idea but I know I got a lot of them in ... So much to do, but it's all good! Enjoy your day!

Reports of a Dow Theory non-confirmation are wrong - actually it's even more bearish than that

Some information for my readers to clarify a point about Dow Theory: I've seen an article this evening claiming that there is a Dow Theory (bearish) non-confirmation because the Dow Industrials have gone positive for the year, while the Dow Transports have not. I'd like to tell my readers that I've learned enough about Dow Theory from the expert, Tim Wood, to assure you that it's even more bearish than that - neither of these indices has risen above their most recent secondary closing highs. Those levels are 9034.69 for the Dow Industrials, and 3717.26 for the Dow Transports, and neither has been exceeded on this rally. So it does not even rise to the level of a non-confirmation.

Below are charts of the Dow Industrials and the Dow Transports using line charts rather than candlesticks. This will make it easier for you to see the important levels that are counted using daily closes in Dow Theory. (But the point is actually the same with candlesticks since the intraday highs haven't been exceeded either.)

Of course, if either index does rise above its important prior swing high level, then we can talk about confirmations whether bearish or bullish. The more objective way to put it would be that one index may exceed its level, and then it would not be confirmed (and therefore remain bearish) unless and until the other confirmed which would then cause the picture to be deemed bullish. But for now, I want to make sure my readers are not misled - neither index has exceeded the important level for Dow Theory purposes.

Rounding up the usual suspects: S&P 500 and VIX support/resistance

Having looked at McClellan data in the prior post, let's review technical indicators and support/resistance levels in the S&P 500 and the VIX. While CCI remains just above 100, StochRSI shows negative divergence. I've drawn chart support/resistance lines too; and the SPX is very close to my 953 as the next Fibonacci retrace level. A minor one at 942 was where the market blinked - let's see if 953 has a stronger effect. Another inconvenient fact: both the Dow industrials and tranports remain under their January highs! (And struggling with 200 dma resistance.)

As for the VIX - I already posted my daily chart of VIX along with a variety of other sentiment measures in a post here yesterday after the close. So below I've provided my weekly VIX chart, with this view going back 8 years. VIX actually did rebound up from that uptrending support line I marked onto it (it's been there for a long time), when VIX touched 26.57 intraday last week. The weekly chart's indicators haven't crossed into bullish mode, but VIX was digging along its lower Bollinger Band and has shown some divergence by only making a higher low when the SPX made higher highs this week. So stay tuned on how VIX is looking not just on the daily but also the weekly chart. If the VIX gets support at that relatively steep uptrend line and then pushes back above that almost-horizontal support/resistance line, along with the BB midline and moving averages on the daily and weekly - and the weekly chart's indicators kick into bullish mode - that would all form a much more bearish picture for equities.



*UPDATE, 6:02 PM - Adding the SPX weekly and the DJIA and TRAN daily charts, below. My trendlines on the SPX weekly are not as precise as those Andre Gratian traces, so the main purpose is that you can see those Fibonacci levels and the indicators (if you can peer past the various markings on my working chart of SPX weekly) - click any image to see it larger: