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Jason Haver: Blue Chips and Bonds -- Equities May Try to Confuse Traders
Equities may have a trick up their sleeves. Here's what to watch.
Jason Haver    

The market has been treating the preferred wave counts well over the past few weeks, and on Tuesday, the S&P 500 (INDEXSP:.INX) dropped down into the 1863-70 zone, while the Dow Jones Industrial Average (INDEXDJX:.DJI) made new lows. 
 
The market has now reached a minor inflection zone, and I'm inclined to think we may see the double retrace rally I spoke about on Friday and Monday. 
 
While I think the intermediate term suggests this is a seller's market, the near-term is on the cusp, and there are two potential challenges for bears over the near-term:
 
1.  Yesterday's decline was only 3-wave in the S&P, leaving open potential that the decline was corrective.
 
2.  The initial decline off the all-time high featured an extended fifth wave. And extended fifths are usually followed by complex "double retrace" corrections -- thus, given the 3-wave decline yesterday, the double-retrace is still a very distinct possibility for the moment.
 
While we've stayed a step ahead of the action lately, this market has been hard on a lot of other traders -- by the time everyone thinks it should be bought, it should be sold; and by the time everyone thinks it should be sold, it should be bought.  While I suggested the market was a "solid sell" near 1882-88, I doubt the masses agreed.  But I'd be willing to bet they agree now -- and that might make this an ideal spot for a second rally leg toward 1888-92 (where everyone will think it's time to buy again... rinse and repeat).
 
I illustrated this double-retrace on Monday's chart, and so far the market has followed the projected path almost perfectly (all I had to do to update the chart was delete the line that price traded over).  It's a tough call right here, but I'm marginally inclined to give the bulls the near-term edge for that second rally leg.  The preferred near-term count would be challenged below 1868 -- if that happens we're likely to see new lows (and probably a whole lot more) more immediately.  Ultimately, new lows are expected either way.
 

Click to enlarge
 
I've also illustrated the near-term wave count in more detail on the Dow chart, and noted a key upside resistance zone  Additionally, I've illustrated the alternate intermediate-term count -- more on that after the chart.  (Incidentally red is the new black -- or vice versa: On the chart, I mention the near-term alternate count in red, but the alternate counts are both in black, as I forgot to change the colors!)
 

Click to enlarge
 
Finally, a quick update to the 30-year Treasury Bond (USB), which is now awfully close to February's target zone.  This is one of the reasons I'm giving consideration to the alternate bullish intermediate wave count in equities:  USB has rallied as expected, but blue chips haven't made much downward progress during this rally.
 

Click to enlarge
 
In conclusion, the near-term is an extremely tight call here, but I'm inclined to give the edge to bulls for a second rally leg to complete a textbook double-retrace rally in the wake of the extended fifth wave decline.  But after that, I expect new lows will follow -- so the intermediate outlook is bearish.  In the event equities are unable to reclaim noted resistance, or in the event S&P sustains trade south of 1868, then the near-term outlook would also turn more immediately bearish.  Trade safe.
 
Follow me on Twitter while I try to figure out exactly how to make practical use of it: @PretzelLogic.

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
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No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Jason Haver: Blue Chips and Bonds -- Equities May Try to Confuse Traders
Equities may have a trick up their sleeves. Here's what to watch.
Jason Haver    

The market has been treating the preferred wave counts well over the past few weeks, and on Tuesday, the S&P 500 (INDEXSP:.INX) dropped down into the 1863-70 zone, while the Dow Jones Industrial Average (INDEXDJX:.DJI) made new lows. 
 
The market has now reached a minor inflection zone, and I'm inclined to think we may see the double retrace rally I spoke about on Friday and Monday. 
 
While I think the intermediate term suggests this is a seller's market, the near-term is on the cusp, and there are two potential challenges for bears over the near-term:
 
1.  Yesterday's decline was only 3-wave in the S&P, leaving open potential that the decline was corrective.
 
2.  The initial decline off the all-time high featured an extended fifth wave. And extended fifths are usually followed by complex "double retrace" corrections -- thus, given the 3-wave decline yesterday, the double-retrace is still a very distinct possibility for the moment.
 
While we've stayed a step ahead of the action lately, this market has been hard on a lot of other traders -- by the time everyone thinks it should be bought, it should be sold; and by the time everyone thinks it should be sold, it should be bought.  While I suggested the market was a "solid sell" near 1882-88, I doubt the masses agreed.  But I'd be willing to bet they agree now -- and that might make this an ideal spot for a second rally leg toward 1888-92 (where everyone will think it's time to buy again... rinse and repeat).
 
I illustrated this double-retrace on Monday's chart, and so far the market has followed the projected path almost perfectly (all I had to do to update the chart was delete the line that price traded over).  It's a tough call right here, but I'm marginally inclined to give the bulls the near-term edge for that second rally leg.  The preferred near-term count would be challenged below 1868 -- if that happens we're likely to see new lows (and probably a whole lot more) more immediately.  Ultimately, new lows are expected either way.
 

Click to enlarge
 
I've also illustrated the near-term wave count in more detail on the Dow chart, and noted a key upside resistance zone  Additionally, I've illustrated the alternate intermediate-term count -- more on that after the chart.  (Incidentally red is the new black -- or vice versa: On the chart, I mention the near-term alternate count in red, but the alternate counts are both in black, as I forgot to change the colors!)
 

Click to enlarge
 
Finally, a quick update to the 30-year Treasury Bond (USB), which is now awfully close to February's target zone.  This is one of the reasons I'm giving consideration to the alternate bullish intermediate wave count in equities:  USB has rallied as expected, but blue chips haven't made much downward progress during this rally.
 

Click to enlarge
 
In conclusion, the near-term is an extremely tight call here, but I'm inclined to give the edge to bulls for a second rally leg to complete a textbook double-retrace rally in the wake of the extended fifth wave decline.  But after that, I expect new lows will follow -- so the intermediate outlook is bearish.  In the event equities are unable to reclaim noted resistance, or in the event S&P sustains trade south of 1868, then the near-term outlook would also turn more immediately bearish.  Trade safe.
 
Follow me on Twitter while I try to figure out exactly how to make practical use of it: @PretzelLogic.

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Jason Haver: Blue Chips and Bonds -- Equities May Try to Confuse Traders
Equities may have a trick up their sleeves. Here's what to watch.
Jason Haver    

The market has been treating the preferred wave counts well over the past few weeks, and on Tuesday, the S&P 500 (INDEXSP:.INX) dropped down into the 1863-70 zone, while the Dow Jones Industrial Average (INDEXDJX:.DJI) made new lows. 
 
The market has now reached a minor inflection zone, and I'm inclined to think we may see the double retrace rally I spoke about on Friday and Monday. 
 
While I think the intermediate term suggests this is a seller's market, the near-term is on the cusp, and there are two potential challenges for bears over the near-term:
 
1.  Yesterday's decline was only 3-wave in the S&P, leaving open potential that the decline was corrective.
 
2.  The initial decline off the all-time high featured an extended fifth wave. And extended fifths are usually followed by complex "double retrace" corrections -- thus, given the 3-wave decline yesterday, the double-retrace is still a very distinct possibility for the moment.
 
While we've stayed a step ahead of the action lately, this market has been hard on a lot of other traders -- by the time everyone thinks it should be bought, it should be sold; and by the time everyone thinks it should be sold, it should be bought.  While I suggested the market was a "solid sell" near 1882-88, I doubt the masses agreed.  But I'd be willing to bet they agree now -- and that might make this an ideal spot for a second rally leg toward 1888-92 (where everyone will think it's time to buy again... rinse and repeat).
 
I illustrated this double-retrace on Monday's chart, and so far the market has followed the projected path almost perfectly (all I had to do to update the chart was delete the line that price traded over).  It's a tough call right here, but I'm marginally inclined to give the bulls the near-term edge for that second rally leg.  The preferred near-term count would be challenged below 1868 -- if that happens we're likely to see new lows (and probably a whole lot more) more immediately.  Ultimately, new lows are expected either way.
 

Click to enlarge
 
I've also illustrated the near-term wave count in more detail on the Dow chart, and noted a key upside resistance zone  Additionally, I've illustrated the alternate intermediate-term count -- more on that after the chart.  (Incidentally red is the new black -- or vice versa: On the chart, I mention the near-term alternate count in red, but the alternate counts are both in black, as I forgot to change the colors!)
 

Click to enlarge
 
Finally, a quick update to the 30-year Treasury Bond (USB), which is now awfully close to February's target zone.  This is one of the reasons I'm giving consideration to the alternate bullish intermediate wave count in equities:  USB has rallied as expected, but blue chips haven't made much downward progress during this rally.
 

Click to enlarge
 
In conclusion, the near-term is an extremely tight call here, but I'm inclined to give the edge to bulls for a second rally leg to complete a textbook double-retrace rally in the wake of the extended fifth wave decline.  But after that, I expect new lows will follow -- so the intermediate outlook is bearish.  In the event equities are unable to reclaim noted resistance, or in the event S&P sustains trade south of 1868, then the near-term outlook would also turn more immediately bearish.  Trade safe.
 
Follow me on Twitter while I try to figure out exactly how to make practical use of it: @PretzelLogic.

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
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