NAV's market analysis

No more blog updates

2011-11-07T18:17:00.000-08:00

Last update for a while: Breakout above SPX 1235 has put my weekly back on a buy signal. So the next logical move is a challenge of the 1370 highs.

I am closing down this blog indefinitely. I have too much trading responsibilities to make timely blog updates. Besides, the intellectual stimulation of analyzing the markets isn't there anymore, to me. I have reached a point in my trading career where i feel that analyzing markets and trading the markets have got nothing to do with each other.

Analyzing the markets is a intellectual game, trying to determine the most probabilistic path based on a set of parameters. Ascertaining the future with precision is no guarantee of trading success, as the markets can gyrate wildly before reaching the intended target, in the process stopping out a good trade. Conversely, lack of future insight is not an impediment to trading success. Good trading is all about simplicity. Knowing the trend, finding a spot to enter, having a reasonable stop and taking profits along the way and recharging when out of positions.

Good trading is not about good charting either. Good charting is more of artistic work, while good trading is more like performance sports. Pouring over charts into the wee hours of midnight and analyzing ten thousand market indicators is a charting obsession. Trading is all about execution. Simple TA techniques based on systems with minimal degrees of freedom can do the job. As for me, mere price candles are enough to trade any market - Yes, absolutely no indicators, not even a moving average or a trendline. In fact i know a few people who don't even look at the charts, just plug-in numbers into a Excel worksheet at the end of the day and trade far more effectively than those who watch every price tick and countless indicators all day long.

Many enter the trading arena with a false notion that there's something mysterious element about the markets, which can be unlocked with technical analysis or fundamental analysis and the futile search for the holy grail begins. This constant search for perfection and some holy grail formula or indicator is what keeps a trader obsessed with charts and technical analysis, taking away the focus from the trade execution. I am no way dismissing the utility of technical analysis, but i think technical analysis plays a very small role in trading success than it's given credit for. Proper trade management and execution is far more important. When the whole world is melting down and your system gives a buy, it requires enormous faith in one's system and mental conditioning and discipline to take that trade. It's much more difficult than pouring over charts and making calls and prophesying about the future.

Trading based on questionable fundamental information or widely known fundamentals is even worse and far more a dangerous game. They belong to the message boards, for folks with day jobs, looking for evening entertainment.

Anyway my point is that charting and technical analysis do not simulate me as much as it did in my early years. My trading responsibilities are growing and i am focusing more on trade management and money management. Making timely updates on blog becomes an obligation and i do not want to be tied down by any obligations, given that i have other things to worry about.

I won't be deleting the blog as i have nothing to hide. There has been some spectacular calls made by me as well as some spectacular failures. It was a great intellectual journey for me. In life priorities and perspectives change and one moves on.

I will try to post some stuff on traders-talk.com when time permits. Even that would be minimal, going forward.

Good luck trading !

Long Term Sell

2011-08-07T20:39:00.000-07:00

On Aug 3, my system triggered a long term sell signal and now S&P enters a bear market based on that signal. I have not updated my blog for a while. I posted the signal in real-time when S&P broke 1249 on Aug 3 at traders-talk. More later....

Long term Sell on S&P

Daily buy signal - June 21, 2011

2011-06-21T18:17:00.000-07:00

My system gave a buy signal today on SPX at 1293. Weekly remains on a sell.

Now here's the big question. Is this just a dead cat bounce before the 1249 levels get taken out ? Only if the market characteristic has changed. Recall during this entire bull market from March 2009, every time a daily sell was generated and the market got oversold, it was time to buy. Bears who used to take the sell signals on the daily charts used to get clobbered. In other words the daily sell signal and oversold conditions in the market was a accumulation point for the big money. If we have entered a bear trend, then that characteristic would reverse. That is, every overbought condition with a daily buy signal would be used as a distribution point by the big money or in other words a daily buy signal would mark a top instead of creating a buy-the-dips context.

But given that the 1249 level is intact, the bull market remains intact for now. So i would give the benefit of doubt to the bulls here. But to avoid the trap i mentioned above, in case the market character has changed, i would avoid any breakout type of trades and focus on buying only the dips.

Daily and weekly back in sync

2011-06-05T19:33:00.000-07:00

My daily buy signal on May 31 turned out to be a massive whipsaw. With the break of SPX 1311, it's back on a sell. Well, the weekly sell from 5/20 survived by a point. The million dollar question is now whether we can break the 1249 lows or not ? If we do, my system will generate a long term sell signal similar to the one that i posted on this blog when we broke 1370 back in Jan 08. Until 1249 holds, we will have to treat this as a correction in a bull market.

I will update again when the daily flips to a buy.

Good luck trading !

Daily buy signal on SPX

2011-05-31T23:20:00.000-07:00

My system has fired a buy signal on SPX daily charts as of close today. So we are now back to uptrending mode, based on my definition, and hence buy-the-dips mode. The last sell signal on daily from my system was on May 5. A close below SPX 1325 is now required to invalidate this buy signal. I will updtae again whenever this signal changes.

Weekly is still on a sell. It will be invalidated if SPX trades above 1347. If the weekly also flips to a buy, then it's high odds that SPX will challenge the April highs or exceed it.

SPX Weekly - Critical juncture

2011-05-22T20:41:00.000-07:00

On April 29, i wrote

If we get a daily sell signal at any point now and a strong selloff, it would leave a nasty diveregent top on the weekly charts. It would also produce a daily/weekly combo sell. Now i have no clue whether that will happen or not. It's just a hypothesis at this point. So i call it a wave C and a terminal wave of this bull market. No Ifs and buts. Now i ask the weekly RSI to prove me wrong.

I got the sell signal on daily on May 5, which i posted on traders-talk.com. Sorry i have not been actively updating this blog as i am very busy with my trading .

Daily sell on May 5

SPX is at a critical juncture on the weekly charts. So i thought i would post an update to my April 29 post. If we break below SPX 1318 this week, then my system will go into a weekly sell this week. A daily/weekly sell combo is a dreaded thing. If SPX has any intentions of making a new high, 1318 is a must hold this week. Otherwise the back of the bull market will be broken. Trade safe !

Final bull market wave in progress

2011-04-29T21:36:00.000-07:00

My April 11 call for a daily sell was good for 30 points, but it turned out to be a minor consolidation in the ongoing wave C, as opposed to test of 1249 which i was expecting (which i have noted in the charts).

I have a daily buy again at SPX 1332, which i could not update in a timely manner as i was on a vacation.

Here's a weekly chart of SPX from March 2009. Every new recovery highs in S&P on the weekly charts have been followed by a new high in the RSI. This is the first time since the rally begun in 2009 that a weekly RSI has started to negatively diverge with the price. That's a wave 5 or a wave C phenomenon, not a wave 3 phenomenon as some analysts who have been labelling it. Now the burden of proof lies on the RSI to prove that it's a wave 3 and not a terminal wave of the bull market. If RSI does make a new high in this leg, then the bears will have to go to hibernation, not for months, but for more than year. It's a historic juncture for sure. Since we are talking about weekly charts here, this current rally may continue for a few more weeks before topping out.

If we get a daily sell signal at any point now and a strong selloff, it would leave a nasty diveregent top on the weekly charts. It would also produce a daily/weekly combo sell. Now i have no clue whether that will happen or not. It's just a hypothesis at this point. So i call it a wave C and a terminal wave of this bull market. No Ifs and buts. Now i ask the weekly RSI to prove me wrong.

Now as for the ST, SPX is on a buy-the-dips mode and i would keep playing only the long side until the daily issues a sell.

I will post the next daily turn in real-time here, as it could turn out to be a very important one.

Quick update - Daily sell

2011-04-11T18:53:00.000-07:00

Just wanted to post a quick update that i have a sell confirmation on the daily charts. This has implications on the wavecount, which i will update during the weekend.

"V" Bottom ?

2011-03-27T08:28:00.000-07:00

My Feb 23 post called for a turn at SPX 1307, for end of wave 5. That also completed a wave A from the Sep 2010 bottom. The call turned out be a good one and since then SPX lost about 60 points into SPX 1249.

The reversal from 1249 was brutal and caught me by surprise. There was no bottoming action whatsoever. March 24 close at 1311 turned my trendicator on daily charts from downtrending to uptrending. So minimally we have a challenge of the 2/18/2011 highs at 1344 and possibly higher than that. Now just because my trendicator turned to uptrending does not unequivocally say that a "V" bottom is the case. But i don't like using alternate count to hedge myself if i am wrong. It is what it is. As a trader i need a firm bias to trade. From a trading viewpoint, SPX 1311 close was a buy point. Any dip can be used to add more. A break below the March 24 low at 1297 would be the stop for the trade and would also put a "V" bottom in question. For now both the hourly and daily are trending higher and the trade is long. If anything changes, i will post a quick update here. Here's the updated e-wave chart

Turn - Feb 23

2011-02-23T19:40:00.001-08:00

In my Feb 02 update, i had called for a rally extension to a max of SPX 1360. Looks like 1344 is all she wrote ! Today's action generated a sell signal on the daily charts, which means the wave 5 extension is likely complete. I will posts the updated e-wave charts later...

- Good luck trading !

Wave 5 extension

2011-02-02T02:52:00.000-08:00

That violent reversal on SPX invalidates my 1/18 turn call for end of wave A. I will have to file that under "failed call". I have noted that accordingly in the chart. The turn ended up as a minor consolidation in wave 5 instead of wave a ending and starting a big correction. So the wave 5 extension continues. If we are in a fifth wave extension, we could go all the way up to SPX 1360. I will not make a guess on the targets. Instead i will post an update when the next turn occurs. So now the context switches back to buying-the-dips.

Good luck !

Market thoughts

2011-01-30T17:52:00.001-08:00

There is no change to the wave count since the turn call i made last week. 1/18 remains the top of wave 5. If the 1/21 to 1/26 move was impulsive, i could have moved the wave 5 top to 1/28. But it's clear to even a non e-waver (look on the hourly charts) that the move from 1/21 to 1/26 was a corrective 3-legged structure. So technically 1/28 is just a irregular top in the ongoing wave b correction. Anyway, labeling apart, it does not make any difference to the implications of the ongoing correction. Corrections after a 5 wave rally retrace to the wave 4 area. wave 4 area in this case is between 1227-1173. So the market should find support somewhere in that area before the next up leg i.e wave C begins, which should run into the spring/summer.

I had made a call on Gold near $1315 that GOLD would drop about $200 based on many technical warning signs on the daily and weekly charts. There were barely any bearish Gold technicians then and when Gold dropped into a wave 5 bottom last week, there were a barrage of bearish postings on GOLD on many message boards. The brutal reversal on GOLD cleaned out all the late to the party folks. GOLD is still not out of the woods. If we trade above $1358 and hold last week lows, then it will confirm that a bottom is in place in GOLD and we should see new highs on it. More on that next week.

Good luck !

Turn - Jan 19, 2011

2011-01-19T17:43:00.000-08:00

In my Jan 5 post, i had mentioned that wave 5 top was still pending and i will update once a turn occurs. There were a couple of hourly sell signals since then, but no damage was done to the daily structure. Today finally i have a sell on the daily charts and a completed wave structure. So the back of the uptrend from the Sep 2010 can now be considered broken. A multi-week intermediate term decline should now be the expectation.

From a e-wave perspective, wave A of the rally has topped and wave B is in progress now, which should ideally take us to the 1160-80 area.

Good luck !

SPX e-wave - Jan 5, 2011

2011-01-04T17:57:00.000-08:00

The wave count that i posted in my last update remains in force. Wave 5 is close to completion, but a turn is unconfirmed yet. SPX 1251 is the key pivot to hold at this point. We may have another day or two or sideways consolidation and one more upthrust after the payrolls report, before heading down in earnest. So the trade is still "buy-the-dips" above the 1251 pivot. Whenever the turn occurs, i will post an update at the EOD.

E-wave count for SPX - Dec 28, 2010

2010-12-28T05:02:00.000-08:00

Sorry, i have not been actively blogging the last few months. I will try to post the e-wave count for SPX going forward, both on a weekly and daily basis.

On the weekly charts we are close to completing the wave a (currently in progress). After this a multi-week correction should be the expectation. But this is not going to be the end of the bull market. There will another leg up after this correction into the spring of 2011 before the fat lady sings.

On the daily charts, we are approaching the end of wave 5, which should kick start a multi-week correction. Use extreme caution here, if you are long. Tighten the stops to the SPX 1232 pivot. I will update here when the turn is confirmed.

SPX LT Oscillator - Close but no cigar !

2010-09-05T06:46:00.001-07:00

Here's a long term Oscillator, which i have been showing on this blog for many years to track the LT turns. Well, since my system on SPX is proprietary, i cannot display any of my trading charts. So I decided to at least post this long term Oscillator for the benefit of those who are into LT investing. This Oscillator is not of much use to a trader as much as for an investor. But it certainly can be indicator to demarcate bull and bear markets.

The rules are pretty simple.

1) For a bear market, we need to have a lower high and lower low on the weekly price charts and the Oscillator has to cross below zero.

2) For a bull market, we need to have a higher low and higher high on the weekly price charts and an oscillator crossover above zero

This week, the market was on the brink of a LT breakdown, but escaped marginally. What the LT bears would not like to see here is a curl up of this MACD above the signal line, which would give back control to the bulls.

In my last post, i had said that the strong rejection from 1130 pretty much nailed the 9 month cycle top. Now the failure to break the SPX 1010 lows and a strong rejection from there pretty much neutralizes the situation. In other words, we are back to square one. My guess is we will double top around the SPX 1130 area and start the next leg down into the 9 month bottom lows due late Oct. But that's just a guess at this point. In a week or two, the market should start giving additional clues.

Good luck trading !

9 month cycle top confirmed

2010-08-12T06:28:00.001-07:00

There was some ambiguity as to whether the May top at SPX 1173 or the the June top at 1131 was the 9 month cycle top. The strong rejection from 1131 pretty much confirms the 9 month cycle top. We should head into the 9 month cycle bottom from here, due in late Oct-Nov

My trendicator also moved to a sell yesterday without a CIT. It's going to be very hard trading this coming volatility with the daily charts(or daily trendicator). By the EOD, a lot of damage can happen. I will start posting the hourly buy/sell signals on traders-talk.com, for those interested.

I will post occasional updates on the daily trendicator here and some big picture thoughts.

Quick update

2010-08-10T19:22:00.000-07:00

The trendicator remains on green status.

Given that S&P is trading below 1131 June highs, it still remains ambiguous as to whether the May 1173 or June 1131 highs constitute the 9 month cycle top. S&P has been forming a triangle over the last few days on the hourly charts. Triangles precede terminal spikes. So we could see most likely see a celebratory spike over the next few days above 1131, before we say adios to this rally.

In the event i get a CIT warning, i will post an update here.

9 month cycle thoughts

2010-08-02T18:36:00.000-07:00

On July 28, i wrote

If today's lows gets taken out, then it would generate a sell with a projection to about SPX 1080-85. I don't see any projections beyond that, at this point.

We acheived that projection. But the trendicator moved from a sell to a outright buy today, without a CIT warning, in a shock and awe style upmove.

We have a 9 month cycle bottom which is due in late Oct - early Nov 2010. Every 9 month cycle bottom after the Oct 08 bottom have made higher lows signifying a cyclical uptrend in prices. In May 2010, we broke the 9 month lows of Feb 2010, and consequently the cyclical uptrend, which indicates that the next 9 month cycle low will potentially be a lower low.

The 9 month cycle crest is amibigous here. It's either the May 2010 top at 1173 (if the cycle was left translated) or the June 2010 top (ideal top) at 1131. Now we are 4 points away from the June 2010 top. Will it hold ? If it was a 9 month crest, it should reject prices strongly here. If not, it would confirm that May 2010 was indeed the 9 month crest and prices should move towards there for a retest and then fail there for a downmove into the 9 mont bottom due late Oct.

If SPX 1173 gets taken out, then the bearish case is over. That would mean a extremely right translated 9 month cycle and the implications are ultra-bullish.

The trendicator is on a buy. So we are back to buy-the-dips mode. But keep an eye on the 1131 and 1173 resistances and watch how the price reacts there. If we see volatile back and forth action below the resistances, then it's a clue that a potential top is getting built.

Good luck !

Trendicator moves to red

2010-07-29T19:08:00.000-07:00

Trendicator moves to red, following the CIT warning yesterday.

CIT warning

2010-07-28T21:14:00.000-07:00

My trendicator has given a CIT warning. CIT warning is not a definitive sell signal. But usually a CIT warning translates into a sell signal the next day, if the low of the daily candle that triggered the CIT, gets taken out. So if today's lows don't get taken out tommorow, then it was much ado about nothing. If today's lows gets taken out, then it would generate a sell with a projection to about SPX 1080-85. I don't see any projections beyond that, at this point.

Well, the upcoming 9 month cycle bottom due in Oct-Nov timeframe is in the back of my mind. But it's too early to say that this is the start of that big decline. Weekly has to turn down before such forecasts are made. At this point the weekly is pointed up. So i will treat this as a correction in an uptrend.

No change

2010-07-27T19:21:00.000-07:00

Power uptrend continues...

Power trend

2010-07-22T21:36:00.001-07:00

Just a quick update. We had a big up day as i posted yesterday. My trendicator has entered a power trending mode now.

Here' some quick details on what a power trending mode means. Power or strongly trending markets are those, where the odds of sucessfully executing a countertrend swing trade becomes extremely low. It does not preclude one from intraday countertrend trades or quick scalps, but is unforgiving when it comes to trying to swing against the trend. Power trend does not measure the size or duration of the move. The move could run for months or end even after a day. It just attempts to charaterize a trend which is in a high momentum zone. So it pays to wait for a potential CIT or actual CIT before any countertrend swing is attempted from this mode.

No change

2010-07-21T20:16:00.000-07:00

The action on the hourly charts today was ugly, but my trendicator failed to produce either a sell signal or a CIT warning. I would have at least expected a CIT with this kind of action. But surprisingly, i did not get one. So the trendicator remains on Green. If the trendicator is right, we should get a huge up day tommorow. If not.... :-)

Daily buy signal

2010-07-20T18:33:00.000-07:00

The signal changed today from strongly downtrending to uptrending, without a CIT warning. Not surprising, given that we had a key reversal day on the daily charts. The next upleg has begun....