Fall 2013 Stock Market Forecast

As the Fall Season approaches, U.S. Stock Indices are at an important juncture. Indeed, the S&P 500 seems poised to resume its own fall from August 2nd highs. Our fall 2013 stock market forecast follows.

Stock Market Forecast Fall 2013

A student of the world economy and capital markets, Steven has applied dynamic system modeling principles to the burgeoning field of econometrics as well as to programmatic trading in equities and options. As an active trader, Steven has achieved a success rate of over 92% in positional equity trades.

Fall Just Around the Corner

From the chart below, we can observe a number of key technical points:

• The highest probability Elliot Wave count defines the August 2nd high as a lasting top;
• The first of many moves down began with Wave 1, which bottomed at 1627 on August 28th;
• Based on its internal structure, Wave 2 up appears close to topping;
• The S&P 500 cash index gapped down from 1685 on Aug 15th. That gap is now closed, as is the equivalent price gap in the DJIA;
• Resistance lies between 1692-1700;
• Daily Stochastics indicator (dashed green circle) shows that the S&P 500 is currently at an overbought level of more than 95%
• The initial price target for Wave 3 down is 1610. By definition, Wave 3 down must be larger than Wave 1.

In addition, there have been six confirmed observations of the “Hindenburg Omen” since early August. This indicator is an overall reflection of market health and reliably portends an imminent fall of 10% or more in index prices.

Furthermore, the economic and geopolitical backdrop is not at all supportive of fresh recovery highs in the three major stock indices:

• Situation in Syria may have temporarily abated with a chemical weapons agreement, but even this may put short-term downward pressure on oil prices and the energy-rich S&P index
• The FED will likely begin tapering bond purchases with the September FOMC announcement. Peaceful resolution of the Syrian dispute will further quiet any related move to postpone tapering
• The fiscal debt ceiling looms large as the U.S. is poised to default on its debt by the end of October 2013
• FED Chairman “Helicopter” Ben Bernanke will likely be replaced by a candidate with far less accommodative policies

In short, major indices are likely at or near the top of the retracement from the first major sell-off. While the S&P 500 index could rise as much as 1708 without penetrating the August 2nd high, it is more likely that September and October will bring a precipitous fall in both prices and outside air temperatures.

This article should be of interest to investors in the SPDR S&P 500 (NYSE: SPY), SPDR Dow Jones (NYSE: DIA), PowerShares QQQ (Nasdaq: QQQ), ProShares Ultra Short S&P 500 (NYSE: SDS), ProShares Short Dow 30 (NYSE: DOG) and the ProShares UltraShort QQQ (NYSE: QID).

DISCLOSURE: The author is currently short the S&P emini contract. He currently plans to cover his short position if prices rise above 1705. Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Technical Analysis of the Stock Market

By Steven Ferguson:

Even as the S&P 500 Index has closed at a fresh new recovery high, we wanted to warn of dangerous underlying market conditions in this technical analysis of the stock market:

1. A confirmed Hindenburg Omen in mid-November points to a significant risk of market crash over the following 90 days. This indicator is extremely reliable. Note that the projected timing and magnitude of the ensuing "crash" are variables within that definition;

2. Technical non-confirmation of new index highs has remained in recent days. That is, the S&P 500 has made a new, intraday recovery high (although not a new closing high) while the Dow and NASDAQ remain below their previous high marks. This indicates classic price divergence and underlying market weakness, at least as long as the condition persists. If instead the Dow does make a new recovery high, that would bode well for a protracted rally, perhaps even into the second quarter. Should that occur, we would still remain vigilant and likely caution readers to "sell in May and walk away";

3. Market indices remain bound by a "Rising Bearish Wedge" pattern where the related trend-lines have provided very strong support and resistance. Index prices have already fallen out of the confines of that wedge but have recently retested the lower boundary. The only real question is how many more times will we trade up to that lower boundary before a more substantial drop occurs. This retesting could continue for some time, particularly if the Dow makes a new recovery high in the process;

4. The "official" Elliot Wave count supports a forecast of major downward movement in index prices;

5. Economic and political factors are pressing enough to provide catalyst for a big drop in the near future. See debt ceiling for more! A Fitch or Moody's (NYSE: MCO) ratings reduction in U.S. debt would almost certainly bring on a wave of selling in stocks. Ironically, this could lead to a flight from riskier assets back to bonds, the very instrument that's been downgraded. Makes us wonder about underlying motives!;

6. First quarter corporate earnings, projected growth and related P/E multiples don’t support much more upside in the near-term at least. Banks are particularly suspect as they trade at high multiples with more write-offs to follow (see Bank of America (NYSE: BAC) and Citigroup (NYSE: C) actions for examples). Good thing we keep relaxing reserve requirements and extending more liquidity …that's always provided adequate means to ensure the banking integrity, right?;

7. Seasonal fund rebalancing is in process though reallocation invariably takes place over a relatively long period to avoid impact on prices. Sell-side algorithms have become very sophisticated and can disguise this for weeks as 401K fund managers exit positions;

8. Bullish sentiment has once again peaked, providing a strong good contrarian indicator;

9. Volume remains very weak;

10. Based on demographics analyses (e.g. Harry Dent), consumer spending and investment patterns are about to change significantly and irreversibly. This observation alone is worth readers' attention, but has a much longer time horizon for lasting impact;

Readers should be mindful of the following technical levels to watch on the S&P cash index:

• 1475 - Significant breakout above could extend rally into second quarter
• 1440 - Significant breakout below would forebode more substantial decline

In any event, new long positions in stocks should be added only with extreme caution.

This technical analysis of the stock market is relevant to broader market interests, including investors in index relative securities including the SPDR S&P 500 (NYSE: SPY), SPDR Dow Jones Industrial Average (NYSE: DIA) and the PowerShares QQQ (NYSE: QQQ).

Disclosure: Ferguson is short the S&P e-minis

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Apocalypse Now or Later?

Greek Readers will note from our initial 2012 forecast:

"Any further upside rally in early 2012 should be contained in both price and duration. If prices fall below 1242 without reaching fresh highs, wave 3 down has already begun. Instead, a definitive break above resistance at 1292 would suggest an alternate wave count and could ultimately lead prices as high as 1350 before wave 3 down begins."

Prices for the S&P Index touched nearly 1345 intraday. The target for alternative Elliot Wave count is now nearly satisfied for an ending diagonal pattern. Prices should turn down from here.

Article should interest investors in SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY), PowerShares QQQ Trust (Nasdaq: QQQ), ProShares Short Dow 30 (NYSE: DOG), ProShares Ultra Short S&P 500 (NYSE: SDS), ProShares Ultra QQQ (NYSE: QLD), NYSE Euronext (NYSE: NYX), The NASDAQ OMX Group (Nasdaq: NDAQ), Intercontinental Exchange (NYSE: ICE), E*Trade Financial (Nasdaq: ETFC), Charles Schwab (Nasdaq: SCHW), Asset Acceptance Capital (Nasdaq: AACC), Affiliated Managers (NYSE: AMG), Ameriprise Financial (NYSE: AMP), TD Ameritrade (Nasdaq: AMTD), BGC Partners (Nasdaq: BGCP), Bank of New York Mellon (NYSE: BK), BlackRock (NYSE: BLK), CIT Group (NYSE: CIT), Calamos Asset Management (Nasdaq: CLMS), CME Group (NYSE: CME), Cohn & Steers (NYSE: CNS), Cowen Group (Nasdaq: COWN), Diamond Hill Investment (Nasdaq: DHIL), Dollar Financial (Nasdaq: DLLR), Duff & Phelps (Nasdaq: DUF), Encore Capital (Nasdaq: ECPG), Edelman Financial (Nasdaq: EF), Equifax (NYSE: EFX), Epoch (Nasdaq: EPHC), Evercore Partners (NYSE: EVR), EXCorp. (Nasdaq: EZPW), FBR Capital Markets (Nasdaq: FBCM), First Cash Financial (Nasdaq: FCFS), Federated Investors (NYSE: FII), First Marblehead (NYSE: FMD), Fidelity National Financial (NYSE: FNF), Financial Engines (Nasdaq: FNGN), FXCM (Nasdaq: FXCM), Gamco Investors (NYSE: GBL), GAIN Capital (Nasdaq: GCAP), Green Dot (Nasdaq: GDOT), GFI Group (Nasdaq: GFIG), Greenhill (NYSE: GHL), Gleacher (Nasdaq: GLCH), Goldman Sachs (NYSE: GS), Interactive Brokers (Nasdaq: IBKR), INTL FCStone (Nasdaq: INTL), Intersections (Nasdaq: INTX), Investment Technology (NYSE: ITG), Invesco (NYSE: IVZ), Jefferies (NYSE: JEF), JMP Group (NYSE: JMP), Janus Capital (NYSE: JNS), KBW (NYSE: KBW), Knight Capital (NYSE: KCG), Lazard (NYSE: LAZ), Legg Mason (NYSE: LM), LPL Investment (Nasdaq: LPLA), Ladenburg Thalmann (AMEX: LTS), Mastercard (NYSE: MA), Moody’s (NYSE: MCO), MF Global (NYSE: MF), Moneygram (NYSE: MGI), MarketAxess (Nasdaq: MKTX), Marlin Business Services (Nasdaq: MRLN), Morgan Stanley (NYSE: MS), MSCI (Nasdaq: MSCI), MGIC Investment (NYSE: MTG), NewStar Financial (Nasdaq: NEWS), National Financial Partners (NYSE: NFP), Nelnet (NYSE: NNI), Northern Trust (Nasdaq: NTRS), NetSpend (Nasdaq: NTSP), Ocwen Financial (NYSE: OCN), Oppenheimer (NYSE: OPY), optionsXpress (Nasdaq: OXPS), PICO (Nasdaq: PICO), Piper Jaffray (NYSE: PJC), PMI Group (NYSE: PMI), Penson Worldwide (Nasdaq: PNSN), Portfolio Recovery (Nasdaq: PRAA), Raymond James (NYSE: RJF), SEI Investments (Nasdaq: SEIC), Stifel Financial (NYSE: SF), Safeguard Scientifics (NYSE: SFE), State Street (NYSE: STT), SWS (NYSE: SWS), T. Rowe Price (Nasdaq: TROW), Visa (NYSE: V) and Virtus Investment Partners (Nasdaq: VRTS).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Stock Apocalypse Now - Updated Technical View

Since our 2012 technical forecast was issued earlier this year, S&P prices have closed right at key resistance of 1292. Apart from the further maturation of the current rally, not much else has changed.

Figure 1 below divides intermediate Elliot Waves into sub-waves in order to illustrate further the maturity of the current rally:

• Intermediate Wave 1 down, shown with black dotted line, consisted of five sub-waves (i) through (v), each of which is depicted with a red dotted line


• Note that sub-wave (iii) down was the largest in magnitude


• Countertrend rallies consist of three-wave movements, in this case shown
  as A through C, and depicted with blue dotted lines


• Sub-wave C can be further subdivided into 5 smaller waves (not shown)

It would appear that the S&P is completing the fifth of five sub-waves within wave C of intermediate Wave 2. Note that daily stochastics are overbought at 94% and that S&P prices closed right at key resistance of 1292.

Once this move is complete, Intermediate Wave 3 down should begin. According to Elliot Wave theory, the magnitude of this wave will exceed that of Wave 1 down, which featured a 300 point drop.

I believe investors should consider taking trading profits from this recent rally to avoid the coming “stock-apocalypse.”

This article should interest investors in SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY), PowerShares QQQ Trust (Nasdaq: QQQ), PowerShares Short Dow 30 (NYSE: DOG), ProShares Ultra Short QQQ (NYSE: QLD), ProShares UltraShort S&P 500 (NYSE: SDS), iShares Russell 2000 (NYSE: IWM).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

The Coming Stock Apocalypse

Doomsday, Dec 21st 2012, may be almost a year away according to the Mayan calendar, but catastrophic downside for stock market indices is likely more imminent. Even in this Presidential election year, a return to March 2009 Bear Market lows is a definite possibility. Perhaps the only question is... when?

A Technical View

Against a backdrop of slowing growth and looming debt crises, both in the U.S. and abroad, stock valuations appear to be suspect:

• Based on current forecasts, U.S. debt will likely eclipse GDP in 2012 even as economic growth slows in the United States. Monetary and fiscal policies are unlikely to be supportive in the current environment;


• Bloomberg reports that over $200B in European debt will come due in the first quarter of 2012 and that the Euro Zone will likely enter recession;


• Morgan Stanley has recently revised growth forecasts in emerging markets downward from 6.1% to 5.7%. Even that growth prediction is contingent upon supportive policy decisions from the U.S. and Europe.

Technical analysis also suggests that downside will resume early in 2012. Elliot Wave Theory identifies the current S&P 500 price pattern as the onset of intermediate Wave 3 down (see Figure 1 below). By definition, Wave 3 down includes the largest price move in a five-wave pattern. This would imply a downside target of roughly 950 or less for this wave movement alone.



From the chart in Figure 1, constructed at author's submission of article on January 1st, we can also observe the following:

• Key resistance for the S&P is at the October high of 1292 with key support at the December 20th low of 1242;


• The 50 day moving average remains below the 200 day moving average; note that this is the so-called “death-cross,” which some treat as the defining indicator for bear market conditions;


• Index closing prices are still hovering near the benchmark 200-day moving average;


• Daily Stochastics show that the S&P 500 is currently overbought as a result of the recent but muted “Santa Clause” rally;


• Current price formation is that of a rising bearish wedge.

Any further upside rally in early 2012 should be contained in both price and duration. If prices fall below 1242 without reaching fresh highs, wave 3 down has already begun. Instead, a definitive break above resistance at 1292 would suggest an alternate wave count and could ultimately lead prices as high as 1350 before wave 3 down begins.

Should the rally continue, this final upward move may also foster conditions for a second, confirming “Hindenburg Omen.” The first instance of the indicator was observed on December 19th 2011. A second observation within a month would provide very reliable foreboding.

In any case, Greek readers should consider taking trading profits from this recent rally to avoid the coming "stock-apocalypse."

Disclosure: I have no position currently, however, I intend to sell (short) S&P futures at 1275.50 or higher.

Article should interest investors in SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY), PowerShares QQQ Trust (Nasdaq: QQQ), ProShares Short Dow 30 (NYSE: DOG), ProShares Ultra Short S&P 500 (NYSE: SDS), ProShares Ultra QQQ (NYSE: QLD), NYSE Euronext (NYSE: NYX), The NASDAQ OMX Group (Nasdaq: NDAQ), Intercontinental Exchange (NYSE: ICE), E*Trade Financial (Nasdaq: ETFC), Charles Schwab (Nasdaq: SCHW), Asset Acceptance Capital (Nasdaq: AACC), Affiliated Managers (NYSE: AMG), Ameriprise Financial (NYSE: AMP), TD Ameritrade (Nasdaq: AMTD), BGC Partners (Nasdaq: BGCP), Bank of New York Mellon (NYSE: BK), BlackRock (NYSE: BLK), CIT Group (NYSE: CIT), Calamos Asset Management (Nasdaq: CLMS), CME Group (NYSE: CME), Cohn & Steers (NYSE: CNS), Cowen Group (Nasdaq: COWN), Diamond Hill Investment (Nasdaq: DHIL), Dollar Financial (Nasdaq: DLLR), Duff & Phelps (Nasdaq: DUF), Encore Capital (Nasdaq: ECPG), Edelman Financial (Nasdaq: EF), Equifax (NYSE: EFX), Epoch (Nasdaq: EPHC), Evercore Partners (NYSE: EVR), EXCorp. (Nasdaq: EZPW), FBR Capital Markets (Nasdaq: FBCM), First Cash Financial (Nasdaq: FCFS), Federated Investors (NYSE: FII), First Marblehead (NYSE: FMD), Fidelity National Financial (NYSE: FNF), Financial Engines (Nasdaq: FNGN), FXCM (Nasdaq: FXCM), Gamco Investors (NYSE: GBL), GAIN Capital (Nasdaq: GCAP), Green Dot (Nasdaq: GDOT), GFI Group (Nasdaq: GFIG), Greenhill (NYSE: GHL), Gleacher (Nasdaq: GLCH), Goldman Sachs (NYSE: GS), Interactive Brokers (Nasdaq: IBKR), INTL FCStone (Nasdaq: INTL), Intersections (Nasdaq: INTX), Investment Technology (NYSE: ITG), Invesco (NYSE: IVZ), Jefferies (NYSE: JEF), JMP Group (NYSE: JMP), Janus Capital (NYSE: JNS), KBW (NYSE: KBW), Knight Capital (NYSE: KCG), Lazard (NYSE: LAZ), Legg Mason (NYSE: LM), LPL Investment (Nasdaq: LPLA), Ladenburg Thalmann (AMEX: LTS), Mastercard (NYSE: MA), Moody’s (NYSE: MCO), MF Global (NYSE: MF), Moneygram (NYSE: MGI), MarketAxess (Nasdaq: MKTX), Marlin Business Services (Nasdaq: MRLN), Morgan Stanley (NYSE: MS), MSCI (Nasdaq: MSCI), MGIC Investment (NYSE: MTG), NewStar Financial (Nasdaq: NEWS), National Financial Partners (NYSE: NFP), Nelnet (NYSE: NNI), Northern Trust (Nasdaq: NTRS), NetSpend (Nasdaq: NTSP), Ocwen Financial (NYSE: OCN), Oppenheimer (NYSE: OPY), optionsXpress (Nasdaq: OXPS), PICO (Nasdaq: PICO), Piper Jaffray (NYSE: PJC), PMI Group (NYSE: PMI), Penson Worldwide (Nasdaq: PNSN), Portfolio Recovery (Nasdaq: PRAA), Raymond James (NYSE: RJF), SEI Investments (Nasdaq: SEIC), Stifel Financial (NYSE: SF), Safeguard Scientifics (NYSE: SFE), State Street (NYSE: STT), SWS (NYSE: SWS), T. Rowe Price (Nasdaq: TROW), Visa (NYSE: V) and Virtus Investment Partners (Nasdaq: VRTS).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

All Hell Breaking Loose?

Since our last technical analysis installment, the S&P has fallen below the April 18th low of $1294.70 and has remained below that level for nearly the entire month of June. As predicted, index prices have also since fallen 3% to a short term low around 1258 and presently sit just above another key support: the March 16th low of 1249 (see "A" in Figure 1). Should that level fail, indeed "all hell may break loose"!

All Hell Breaking Loose?

The tension in the current price movements is accentuated by several converging lines of support and resistance:

• Resistance: the April low of 1294;
• Support: the March low of 1250;
• Resistance: 20 day moving average at 1287;
• Support 200 day moving average at 1264;
• Resistance: the falling trend-line that has acted as resistance to any rally -- see grey dotted line labeled with “B” above

Of particular note is the current price relative to the 200 day moving average. A decisive drop below this level would likely prompt institutional selling.

In any case, index prices are definitely poised for a big move in either direction. With austerity measures in Greece hanging on a single-vote; with the possibility of pre-earnings announcements looming any day; and with seasonal weakness likely through the end of June, short-term capitulation to 1233-1240 would seem a precursor to any significant Fourth-of-July rally. Let the sparks fly!



Article should interest investors in Bank of America (NYSE: BAC), J.P. Morgan Chase (NYSE: JPM), Goldman Sachs (NYSE: GS), Citigroup (NYSE: C), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), TD Bank (NYSE: TD), PNC Bank (NYSE: PNC), State Street (NYSE: STT), Janus (NYSE: JNS), T. Rowe Price (Nasdaq: TROW), General Electric (NYSE: GE), Wal-Mart (NYSE: WMT), McDonald's (NYSE: MCD), Alcoa (NYSE: AA), American Express (NYSE: AXP), Boeing (NYSE: BA), Caterpillar (NYSE: CAT), Cisco Systems (Nasdaq: CSCO), Chevron (NYSE: CVX), DuPont (NYSE: DD), Walt Disney (NYSE: DIS), Home Depot (NYSE: HD), Hewlett-Packard (NYSE: HPQ), IBM (NYSE: IBM), Intel (Nasdaq: INTC), Johnson & Johnson (NYSE: JNJ), Kraft (NYSE: KFT), Coca-Cola (NYSE: KO), 3M (NYSE: MMM), Merck (NYSE: MRK), Microsoft (Nasdaq: MSFT), Pfizer (NYSE: PFE), Procter & Gamble (NYSE: PG), AT&T (NYSE: T), Travelers (NYSE: TRV), United Technologies (NYSE: UTX), Verizon (NYSE: VZ), Exxon Mobil (NYSE: XOM), Paychex (Nasdaq: PAYX), Manpower (NYSE: MAN), Robert Half International (NYSE: RHI), 51Job Inc. (Nasdaq: JOBS), Monster World Wide (NYSE: MWW), Korn/Ferry International (NYSE: KFY), Administaff (NYSE: ASF), Kforce (Nasdaq: KFRC), TrueBlue (NYSE: TBI), Dice Holdings (NYSE: DHX), Kelly Services (Nasdaq: KELYA), SFN Group (NYSE: SFN), CDI Corp. (NYSE: CDI), Cross Country Healthcare (Nasdaq: CCRN), On Assignment (Nasdaq: ASGN), AMN Healthcare Services (NYSE: AHS), Barrett Business Services (Nasdaq: BBSI), Hudson Highland Group (Nasdaq: HHGP), StarTek (NYSE: SRT), RCM Technologies (Nasdaq: RCMT), VirtualScopics (Nasdaq: VSCP), General Employment Enterprises (NYSE: JOB) and TeamStaff (Nasdaq: TSTF).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Smoke and Mirrors

In his latest report, Wall Street Greek Technical Analyst Steven Ferguson discusses the ongoing relevance of technical analysis, despite recent market defiance of technical metrics. Ferguson speaks of interference by an invisible hand at critical junctures, but suggests investors ignore smoke and mirrors and stay attuned to the trend-line.

Relative tickers: NYSE: DIA, NYSE: SPY, Nasdaq: QQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, Nasdaq: NDAQ, NYSE: ICE, Nasdaq: ETFC, Nasdaq: SCHW, Nasdaq: AACC, NYSE: AMG, NYSE: AMP, Nasdaq: AMTD, Nasdaq: BGCP, NYSE: BK, NYSE: BLK, NYSE: CIT, Nasdaq: CLMS, NYSE: CME, NYSE: CNS, Nasdaq: COWN, Nasdaq: DHIL, Nasdaq: DLLR, Nasdaq: DUF, Nasdaq: ECPG, Nasdaq: EF, NYSE: EFX, Nasdaq: EPHC, NYSE: EVR, Nasdaq: EZPW, Nasdaq: FBCM, Nasdaq: FCFS, NYSE: FII, NYSE: FMD, NYSE: FNF, Nasdaq: FNGN, Nasdaq: FXCM, NYSE: GBL, Nasdaq: GCAP, Nasdaq: GDOT, Nasdaq: GFIG, NYSE: GHL, Nasdaq: GLCH, NYSE: GS, Nasdaq: IBKR, Nasdaq: INTL, Nasdaq: INTX, NYSE: ITG, NYSE: IVZ, NYSE: JEF, NYSE: JMP, NYSE: JNS, NYSE: KBW, NYSE: KCG, NYSE: LAZ, NYSE: LM, Nasdaq: LPLA, AMEX: LTS, NYSE: MA, NYSE: MCO, NYSE: MF, NYSE: MGI, Nasdaq: MKTX, Nasdaq: MRLN, NYSE: MS, Nasdaq: MSCI, NYSE: MTG, Nasdaq: NEWS, NYSE: NFP, NYSE: NNI, Nasdaq: NTRS, Nasdaq: NTSP, NYSE: OCN, NYSE: OPY, Nasdaq: OXPS, Nasdaq: PICO, NYSE: PJC, NYSE: PMI, Nasdaq: PNSN, Nasdaq: PRAA, NYSE: RJF, Nasdaq: SEIC, NYSE: SF, NYSE: SFE, NYSE: STT, NYSE: SWS, Nasdaq: TROW, NYSE: V and Nasdaq: VRTS.

Smoke and Mirrors

Once again, market indices sit at a critical juncture. Since July 2010 and until last week, prices have traded within the trend channel similar to the one depicted in Figure 1 below. As annotated by the arrow labeled "A," the S&P closing price has recently dropped outside that channel, has since retested the lower boundary, and presently remains slightly below that level at $1300.61.

Furthermore, Friday’s close lies tenuously above the April 18th low of $1294.70 annotated by arrow "B" in the chart. A decisive break below $1294 would likely lead to a further correction of 3-5% in the near term and could very possibly signify that the often-anticipated top to the bear market rally occurred with the May peak and is already in place.



However, each time indices have reached such a level, it seems a not-so Invisible Hand has intervened to support asset prices and (ostensibly) prevent illiquidity. Often such intervention occurs during a Globex trading session, very often on a Sunday night when trading volume can be especially thin. Despite foreboding technical indicators, the market somehow defies gravity and resumes its multi-year rally against the backdrop of a carefully-orchestrated economic mirage.

Thus technical analysis, particularly analysis that has been founded on Elliot Wave, seems to be confounded by unnatural market forces, surreptitious intervention and even high frequency trading algorithms. This would seem to be a plausible outcome since the existence of wave patterns identified by Elliot Wave theory is predicated upon predominant action and reaction of human participants in the context of a free market.

However, EW’s Prechter and others insist (for example) that, because computers are programmed by humans based on their own understanding of market action, Elliot Wave patterns can still accurately capture and anticipate market price movements. And since the FED is like any other market respondent, it cannot hope to offset the eventual behavior of market masses through its policy decisions and monetary countermeasures. Nevertheless, EW practitioners have been forced to interpret rules in more obscure ways in order to accommodate these increasingly invasive and unnatural market forces.

So where does that leave technical analysis in general and Elliot Wave in particular? Should we abandon it? Should we ignore the signposts that it often provides?

The answer is a resounding "No!" Instead, we may confidently continue to use technical analysis as a basis for shorter-term trading and as a tool to optimize the timing of longer-term investment decisions.

In particular:

• Technical analysis can be used to identify high probability outcomes in various time frames. The prediction of these outcomes does not eliminate the likelihood that lower probability outcomes will occur. The key is to identify the important price levels and respond appropriately when those levels are achieved or violated. In the present case, the author has a modest short position in June S&P futures with the expectation that prices could break key support of 1290. A decisive rise above 1306 would lead me to cover my short position.


• Technical analysis seems more effective as a basis for short-term trading and for localized timing of longer-term investment decisions. A review of recent articles in this column would reveal that, although we may not have been able to identify the market top, each prediction has correctly warned of a significant price move. Furthermore, as we approach our third significant market top in a little over a decade, it would seem that such market timing is increasingly important. Particularly in the age of high-frequency trading promulgated largely by the investment banks, buy-and-hold may no longer provide a viable investment strategy. This increases the importance in awareness and interpretation of key technical indicators.


• The principles that underlie Elliot Wave theory remain valid, particularly the emphasis on analytical understanding of crowd behavior. While identification of specific wave patterns can be problematic, Elliot Wave also emphasizes the measurement of market sentiment with the basic notion that extreme values foretell reversal. Such has been the case recently with precious metals, especially silver. With so many traders and retail investors scrambling to speculate on the price of silver, a significant drop was imminent. The recent drop in silver likely signifies just the beginning of the correction in the commodities bubble as a whole.


• Economic fundamentals remain an important back drop to technical analysis. Through his own cogent evaluation of economic indicators, the Greek has often exposed the fallacy in popular views of economic growth. Even though the FED may continue to intervene with QE3, QE4 …QEx, and the US Government (indeed all governments worldwide) may continue to raise debt ceilings in their vain efforts to preserve public spending through taxpayer indebtedness, it is painfully obvious that these measures have largely failed to solve basic problems in housing, credit and unemployment.

Therefore, this is no time for complacency, even in long-term investments! The author urges readers to remain alert for signs of technical weakness. The Greek will continue to provide an important source of early warning for our readership.



Article should interest investors in SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY), PowerShares QQQ Trust (Nasdaq: QQQ), ProShares Short Dow 30 (NYSE: DOG), ProShares Ultra Short S&P 500 (NYSE: SDS), ProShares Ultra QQQ (NYSE: QLD), NYSE Euronext (NYSE: NYX), The NASDAQ OMX Group (Nasdaq: NDAQ), Intercontinental Exchange (NYSE: ICE), E*Trade Financial (Nasdaq: ETFC), Charles Schwab (Nasdaq: SCHW), Asset Acceptance Capital (Nasdaq: AACC), Affiliated Managers (NYSE: AMG), Ameriprise Financial (NYSE: AMP), TD Ameritrade (Nasdaq: AMTD), BGC Partners (Nasdaq: BGCP), Bank of New York Mellon (NYSE: BK), BlackRock (NYSE: BLK), CIT Group (NYSE: CIT), Calamos Asset Management (Nasdaq: CLMS), CME Group (NYSE: CME), Cohn & Steers (NYSE: CNS), Cowen Group (Nasdaq: COWN), Diamond Hill Investment (Nasdaq: DHIL), Dollar Financial (Nasdaq: DLLR), Duff & Phelps (Nasdaq: DUF), Encore Capital (Nasdaq: ECPG), Edelman Financial (Nasdaq: EF), Equifax (NYSE: EFX), Epoch (Nasdaq: EPHC), Evercore Partners (NYSE: EVR), EXCorp. (Nasdaq: EZPW), FBR Capital Markets (Nasdaq: FBCM), First Cash Financial (Nasdaq: FCFS), Federated Investors (NYSE: FII), First Marblehead (NYSE: FMD), Fidelity National Financial (NYSE: FNF), Financial Engines (Nasdaq: FNGN), FXCM (Nasdaq: FXCM), Gamco Investors (NYSE: GBL), GAIN Capital (Nasdaq: GCAP), Green Dot (Nasdaq: GDOT), GFI Group (Nasdaq: GFIG), Greenhill (NYSE: GHL), Gleacher (Nasdaq: GLCH), Goldman Sachs (NYSE: GS), Interactive Brokers (Nasdaq: IBKR), INTL FCStone (Nasdaq: INTL), Intersections (Nasdaq: INTX), Investment Technology (NYSE: ITG), Invesco (NYSE: IVZ), Jefferies (NYSE: JEF), JMP Group (NYSE: JMP), Janus Capital (NYSE: JNS), KBW (NYSE: KBW), Knight Capital (NYSE: KCG), Lazard (NYSE: LAZ), Legg Mason (NYSE: LM), LPL Investment (Nasdaq: LPLA), Ladenburg Thalmann (AMEX: LTS), Mastercard (NYSE: MA), Moody’s (NYSE: MCO), MF Global (NYSE: MF), Moneygram (NYSE: MGI), MarketAxess (Nasdaq: MKTX), Marlin Business Services (Nasdaq: MRLN), Morgan Stanley (NYSE: MS), MSCI (Nasdaq: MSCI), MGIC Investment (NYSE: MTG), NewStar Financial (Nasdaq: NEWS), National Financial Partners (NYSE: NFP), Nelnet (NYSE: NNI), Northern Trust (Nasdaq: NTRS), NetSpend (Nasdaq: NTSP), Ocwen Financial (NYSE: OCN), Oppenheimer (NYSE: OPY), optionsXpress (Nasdaq: OXPS), PICO (Nasdaq: PICO), Piper Jaffray (NYSE: PJC), PMI Group (NYSE: PMI), Penson Worldwide (Nasdaq: PNSN), Portfolio Recovery (Nasdaq: PRAA), Raymond James (NYSE: RJF), SEI Investments (Nasdaq: SEIC), Stifel Financial (NYSE: SF), Safeguard Scientifics (NYSE: SFE), State Street (NYSE: STT), SWS (NYSE: SWS), T. Rowe Price (Nasdaq: TROW), Visa (NYSE: V) and Virtus Investment Partners (Nasdaq: VRTS).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Addicted Market Could Crash Off High

Coming Down Off Liquidity High

Wall Street Greek Technical Strategist Steven Ferguson offers a fresh look at the perilous technical high wire act the market seems to be performing, and he warns again of serious trouble signs in the charts.

Relative Tickers: NYSE: GS, NYSE: C, NYSE: BAC, NYSE: WFC, NYSE: MS, NYSE: JPM, NYSE: TD, NYSE: PNC, Nasdaq: TROW, NYSE: STT, NYSE: STD, NYSE: DB, NYSE: BCS, NYSE: NBG, NYSE: JNS, NYSE: BX, NYSE: BLK, Nasdaq: ETFC, Nasdaq: TSCM, Nasdaq: AMTD, Nasdaq: MEMKX, Nasdaq: GECMX, Nasdaq: JEVOX, Nasdaq: PEMAX, NYSE: EEM, NYSE: VWO, Nasdaq: VEIEX, Nasdaq: ADRE, Nasdaq: PEBIX, Nasdaq: GMCEX, NYSE: MSF, NYSE: EEV, Nasdaq: REMGX, NYSE: GMM, NYSE: EDZ, AMEX: ETF, NYSE: FEO, NYSE: ESD, NYSE: MSD, NYSE: EMF, NYSE: TEI, Nasdaq: EMIF, NYSE: EFN, NYSE: EMT, NYSE: PCY, NYSE: PXH, NYSE: GMF, NYSE: GUR, NYSE: GML, NYSE: GMM, NYSE: EWX, NYSE: GAF, NYSE: EUF, NYSE: EET, Nasdaq: ABEMX, Nasdaq: AEMGX, Nasdaq: APERX, Nasdaq: PMGAX, Nasdaq: PMCIX, Nasdaq: AOTAX, Nasdaq: AOTCX, Nasdaq: AOTDX, Nasdaq: AEMPX, Nasdaq: AOTIX, Nasdaq: AEMEX, Nasdaq: AAMRX, Nasdaq: AEMFX, Nasdaq: AAEPX, Nasdaq: AEMMX, Nasdaq: ACKBX, Nasdaq: ACECX, Nasdaq: AMKIX, Nasdaq: TWMIX, Nasdaq: NDAQ, NYSE: PIZ, NYSE: PIE, NYSE: PDP, NYSE: DIA, NYSE: SPY, NYSE: NYX, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: IWM, NYSE: TWM, NYSE: IWD, NYSE: SDK, NYSE: ICE, Nasdaq: QQQQ, Nasdaq: HTOAX, Nasdaq: HTOTX, Nasdaq: HTOBX, Nasdaq: JTCIX, Nasdaq: JTCNX, Nasdaq: JTCAX.

Addicted Market Could Crash Off High

For a market propelled to new recovery highs by the same liquid(ity) drug that has fueled every major asset bubble in the past, and that has led to the current credit crisis hangover, the moment of truth has arrived. Either a correction will begin this week, or it will be postponed to another date several weeks or even months in the future, with the potential for drop only becoming more dramatic as that date with destiny is forestalled.

Either the S&P will fall below key support at 1260 or it will rise a minimum of 30 points higher. Should the S&P remain above 1291, I believe traders should cover open short positions.

Major indices closed Friday at the top of a trend-line that forms the upper boundary of a bearish rising wedge, depicted in the chart below. The rising wedge has formed within a larger trend channel. The more times that prices traverse between the lower and upper boundary of that channel, the weaker market internals have become. It is under these circumstances that we most often observe the Hindenburg Omen indicator.



As well, the Elliot Wave structure, depicted in the chart below, now satisfies pattern identification rules for completion of the rally. Note that the entire rally is comprised of an A-B-C wave structure, where the index is presently completing wave C. Wave C is annotated in blue, with the five sub-waves each depicted individually. Importantly, the magnitude and duration of the move accomplished by the fifth wave in a five wave pattern now satisfies optimal criteria for pattern completion. And although Elliot Wave rules would have allowed the fifth wave to terminate at any time, such a pattern rarely truncates before the length of wave five equals that of wave one. Such is now the case, as can be seen through visual comparison of sub-waves 1 and 5 in the chart below.



We also note that an important and reliable Phi Turn window has now passed. The clock is ticking on a confirmed Hindenburg Omen. Credit turmoil continues to churn even as the upchuck is swabbed down the financial drain. If markets continue to rise significantly above Friday's close, the next target is 2.5% higher again at the top of the trend channel. For a correction to begin in earnest, support levels must be penetrated. Greek readers must remain vigilant.



Disclosure: I am short S&P 500 Index Futures

Article may interest investors in NYSE: GS, NYSE: C, NYSE: BAC, NYSE: WFC, NYSE: MS, NYSE: JPM, NYSE: TD, NYSE: PNC, Nasdaq: TROW, NYSE: STT, NYSE: STD, NYSE: DB, NYSE: BCS, NYSE: NBG, NYSE: JNS, NYSE: BX, NYSE: BLK, Nasdaq: MEMKX, Nasdaq: GECMX, Nasdaq: JEVOX, Nasdaq: PEMAX, NYSE: EEM, NYSE: VWO, Nasdaq: VEIEX, Nasdaq: ADRE, Nasdaq: PEBIX, Nasdaq: GMCEX, NYSE: MSF, NYSE: EEV, Nasdaq: REMGX, NYSE: GMM, NYSE: EDZ, AMEX: ETF, NYSE: FEO, NYSE: ESD, NYSE: MSD, NYSE: EMF, NYSE: TEI, Nasdaq: EMIF, NYSE: EFN, NYSE: EMT, NYSE: PCY, NYSE: PXH, NYSE: GMF, NYSE: GUR, NYSE: GML, NYSE: GMM, NYSE: EWX, NYSE: GAF, NYSE: EUF, NYSE: EET, Nasdaq: ABEMX, Nasdaq: AEMGX, Nasdaq: APERX, Nasdaq: PMGAX, Nasdaq: PMCIX, Nasdaq: AOTAX, Nasdaq: AOTCX, Nasdaq: AOTDX, Nasdaq: AEMPX, Nasdaq: AOTIX, Nasdaq: AEMEX, Nasdaq: AAMRX, Nasdaq: AEMFX, Nasdaq: AAEPX, Nasdaq: AEMMX, Nasdaq: ACKBX, Nasdaq: ACECX, Nasdaq: AMKIX, Nasdaq: TWMIX, Nasdaq: NDAQ, NYSE: PIZ, NYSE: PIE, NYSE: PDP, NYSE: DIA, NYSE: SPY, NYSE: NYX, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: IWM, NYSE: TWM, NYSE: IWD, NYSE: SDK, NYSE: ICE, Nasdaq: QQQQ, Nasdaq: HTOAX, Nasdaq: HTOTX, Nasdaq: HTOBX, Nasdaq: JTCIX, Nasdaq: JTCNX, Nasdaq: JTCAX.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Imminent Stock Market Decline

The Long and Short of It

In his last article, Wall Street Greek Technical Analyst Steven Ferguson outlined several ominous technical indicators that point to a change in market direction. In this piece, he clarifies and further details how the turn might play out given various factors at play. Ferguson says a "rounded top" is more likely in the near-term, which supports the exit from long positions at this point, while not necessarily directing immediate aggressive shorting.

Relative Tickers: NYSE: GS, NYSE: C, NYSE: BAC, NYSE: WFC, NYSE: MS, NYSE: JPM, NYSE: TD, NYSE: PNC, Nasdaq: TROW, NYSE: STT, NYSE: STD, NYSE: DB, NYSE: BCS, NYSE: NBG, NYSE: JNS, NYSE: BX, NYSE: BLK, Nasdaq: ETFC, Nasdaq: TSCM, Nasdaq: AMTD, Nasdaq: MEMKX, Nasdaq: GECMX, Nasdaq: JEVOX, Nasdaq: PEMAX, NYSE: EEM, NYSE: VWO, Nasdaq: VEIEX, Nasdaq: ADRE, Nasdaq: PEBIX, Nasdaq: GMCEX, NYSE: MSF, NYSE: EEV, Nasdaq: REMGX, NYSE: GMM, NYSE: EDZ, AMEX: ETF, NYSE: FEO, NYSE: ESD, NYSE: MSD, NYSE: EMF, NYSE: TEI, Nasdaq: EMIF, NYSE: EFN, NYSE: EMT, NYSE: PCY, NYSE: PXH, NYSE: GMF, NYSE: GUR, NYSE: GML, NYSE: GMM, NYSE: EWX, NYSE: GAF, NYSE: EUF, NYSE: EET, Nasdaq: ABEMX, Nasdaq: AEMGX, Nasdaq: APERX, Nasdaq: PMGAX, Nasdaq: PMCIX, Nasdaq: AOTAX, Nasdaq: AOTCX, Nasdaq: AOTDX, Nasdaq: AEMPX, Nasdaq: AOTIX, Nasdaq: AEMEX, Nasdaq: AAMRX, Nasdaq: AEMFX, Nasdaq: AAEPX, Nasdaq: AEMMX, Nasdaq: ACKBX, Nasdaq: ACECX, Nasdaq: AMKIX, Nasdaq: TWMIX, Nasdaq: NDAQ, NYSE: PIZ, NYSE: PIE, NYSE: PDP, NYSE: DIA, NYSE: SPY, NYSE: NYX, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: IWM, NYSE: TWM, NYSE: IWD, NYSE: SDK, NYSE: ICE, Nasdaq: QQQQ, Nasdaq: HTOAX, Nasdaq: HTOTX, Nasdaq: HTOBX, Nasdaq: JTCIX, Nasdaq: JTCNX, Nasdaq: JTCAX.

Imminent Stock Market Decline: The Long and Short of It

At present, it would appear that the market turning point is indeed at hand. The Greek exposited the real unemployment situation in his recap of Friday's labor report, which as usual, was meant to obscure the truth. Here in the Midwest, most of those I know on unemployment rolls have given up looking for work and would prefer to continue receiving their perpetual entitlement. And those who could offer them employment are uncertain about capital expenditures in the future, so they continue to do more with less while they still have more to do.

Do these signs of an enervated economy mean a stock market crash (or worse, a bond market crash!) is imminent? Did any of the technical indicators reviewed in "Who You Callin Short?" suggest a 20% decline should occur over the next five trading sessions? Certainly not. And just in case there might be any confusion as to the nature of the prediction offered by the previous article, here are some key clarifications:

• None of the cited technical indicators suggested that there would be any dramatic sell-off occurring on or about January 6, 2011. Instead, the Phi Turn date predicts a turning point in market action, probably containing an intraday high that would last for many weeks if not months/years (depending on whether the Phi Turn event marks THE top). The Phi Turn date has a tolerance of a few days in either direction. The presence of two Phi Turns within the past 6 trading session suggests that the turn may have occurred on Thursday.


• However, given the strong uptrend that has led to this point, the actual reversal is more likely to form a "rounded top" than a sharp ski slope. There remains a possibility within the Elliot Wave count (five of five) that the DOW could reach back to the 11750-11775 range, corresponding to 1280-1291 on the S&P. This would allow for one more intraday high early this week without violating the rules of the wave pattern. After that, a return to higher volatility is to be expected as the VIX appears ready to break out.


• Still, we note that the S&P cash index dropped ten points intraday on Friday to a very important line of technical support, 1260. A break below this support early this week would solidify the case for the market reversal. A convincing break back above 1291 would signal several more weeks of uptrend, with the projected price 2.5% above the previous 52-week high.


• Last, the confirmed Hindenburg Omen does forebode a steep decline but not necessarily an imminent one. In the last 25 years, Dr. Robert McHugh of Main Line Investors, Inc. found that 28 "officially" confirmed Hindenburg Omen signals have occurred. In all but one of those cases, a decline of at least 5% followed. In almost a third of those cases, a crash of 15-20% or more occurred. The precipitous decline could start at any time and could last any number of trading sessions.

Based on the above, this author recommends that readers take profits from long positions. More aggressive traders may weigh short positions in index ETFs, sectors or individual stocks that are highly correlated with the market at large. That's the long and the short of it.

Disclosure: I am short S&P 500 Index Futures



Article may interest investors in NYSE: GS, NYSE: C, NYSE: BAC, NYSE: WFC, NYSE: MS, NYSE: JPM, NYSE: TD, NYSE: PNC, Nasdaq: TROW, NYSE: STT, NYSE: STD, NYSE: DB, NYSE: BCS, NYSE: NBG, NYSE: JNS, NYSE: BX, NYSE: BLK, Nasdaq: MEMKX, Nasdaq: GECMX, Nasdaq: JEVOX, Nasdaq: PEMAX, NYSE: EEM, NYSE: VWO, Nasdaq: VEIEX, Nasdaq: ADRE, Nasdaq: PEBIX, Nasdaq: GMCEX, NYSE: MSF, NYSE: EEV, Nasdaq: REMGX, NYSE: GMM, NYSE: EDZ, AMEX: ETF, NYSE: FEO, NYSE: ESD, NYSE: MSD, NYSE: EMF, NYSE: TEI, Nasdaq: EMIF, NYSE: EFN, NYSE: EMT, NYSE: PCY, NYSE: PXH, NYSE: GMF, NYSE: GUR, NYSE: GML, NYSE: GMM, NYSE: EWX, NYSE: GAF, NYSE: EUF, NYSE: EET, Nasdaq: ABEMX, Nasdaq: AEMGX, Nasdaq: APERX, Nasdaq: PMGAX, Nasdaq: PMCIX, Nasdaq: AOTAX, Nasdaq: AOTCX, Nasdaq: AOTDX, Nasdaq: AEMPX, Nasdaq: AOTIX, Nasdaq: AEMEX, Nasdaq: AAMRX, Nasdaq: AEMFX, Nasdaq: AAEPX, Nasdaq: AEMMX, Nasdaq: ACKBX, Nasdaq: ACECX, Nasdaq: AMKIX, Nasdaq: TWMIX, Nasdaq: NDAQ, NYSE: PIZ, NYSE: PIE, NYSE: PDP, NYSE: DIA, NYSE: SPY, NYSE: NYX, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: IWM, NYSE: TWM, NYSE: IWD, NYSE: SDK, NYSE: ICE, Nasdaq: QQQQ, Nasdaq: HTOAX, Nasdaq: HTOTX, Nasdaq: HTOBX, Nasdaq: JTCIX, Nasdaq: JTCNX, Nasdaq: JTCAX.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Short the S&P 500 Index in Early 2011

Who You Callin Short?

This Wall Street Greek author is now short the market, specifically the S&P 500. In my view, we have reached the tipping point in a rally that has lasted almost two years on borrowed money and borrowed time. Time is growing short and I am afraid smart money is about to do the same.

Relative Tickers: NYSE: GS, NYSE: C, NYSE: BAC, NYSE: WFC, NYSE: MS, NYSE: JPM, NYSE: TD, NYSE: PNC, Nasdaq: TROW, NYSE: STT, NYSE: STD, NYSE: DB, NYSE: BCS, NYSE: NBG, Nasdaq: MEMKX, Nasdaq: GECMX, Nasdaq: JEVOX, Nasdaq: PEMAX, NYSE: EEM, NYSE: VWO, Nasdaq: VEIEX, Nasdaq: ADRE, Nasdaq: PEBIX, Nasdaq: GMCEX, NYSE: MSF, NYSE: EEV, Nasdaq: REMGX, NYSE: GMM, NYSE: EDZ, AMEX: ETF, NYSE: FEO, NYSE: ESD, NYSE: MSD, NYSE: EMF, NYSE: TEI, Nasdaq: EMIF, NYSE: EFN, NYSE: EMT, NYSE: PCY, NYSE: PXH, NYSE: GMF, NYSE: GUR, NYSE: GML, NYSE: GMM, NYSE: EWX, NYSE: GAF, NYSE: EUF, NYSE: EET, Nasdaq: ABEMX, Nasdaq: AEMGX, Nasdaq: APERX, Nasdaq: PMGAX, Nasdaq: PMCIX, Nasdaq: AOTAX, Nasdaq: AOTCX, Nasdaq: AOTDX, Nasdaq: AEMPX, Nasdaq: AOTIX, Nasdaq: AEMEX, Nasdaq: AAMRX, Nasdaq: AEMFX, Nasdaq: AAEPX, Nasdaq: AEMMX, Nasdaq: ACKBX, Nasdaq: ACECX, Nasdaq: AMKIX, Nasdaq: TWMIX, Nasdaq: NDAQ, NYSE: PIZ, NYSE: PIE, NYSE: PDP, NYSE: DIA, NYSE: SPY, NYSE: NYX, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: IWM, NYSE: TWM, NYSE: IWD, NYSE: SDK, NYSE: ICE, Nasdaq: QQQQ, Nasdaq: HTOAX, Nasdaq: HTOTX, Nasdaq: HTOBX, Nasdaq: JTCIX, Nasdaq: JTCNX, Nasdaq: JTCAX.

Short the S&P 500 Index and the Market in Early 2011

In previous articles, I have recommended that readers take cash out of any long positions at key junctures. In each of these articles, I have presented a case that the technical formation in the market at that particular point in time represented the top of the bear market rally. As is always true with such technical indicators, even with the market in general, any bearish or bullish outlook always comes with associated statistical probabilities. So it is up to the reader to judge in accord with a recent WSG article whether I was "wrong or early?"

In this particular case, many technical indicators suggest that odds are high a decline is about to occur and that the current formation represents the top of the bear market rally:

• According to Elliot Wave (EW) theory, the current five wave structure, which is in turn a sub-structure of the final leg in the rally that began in March 2009, logically completes the retracement of bull market highs from 2007. Of course, the uncertainty with application of Elliot Wave is that many such structures are possible within the fractal wave patterns defined by EW rules. Since these patterns are completely recognizable only in retrospect, rules offer contingency outcomes if and when those rules are broken.


• This same five wave structure forms a classic "bearish rising wedge" on the S&P. A break below 1255 on the S&P Cash Index would suggest that prices are beginning to deteriorate, with a short-term technical target at around 1180.


• Any previous technical target associated with the bullish (inverse) head and shoulders which formed with the market bottom has been fully achieved.


• Index retracement is above the key Fibonacci level of 61.8% and is now at around two-thirds or 66.7% of the drop from bull market highs. Some view this level as technically important though it does not correspond to a Fibonacci ratio.


• Two key Phi Turn dates occur within a one week trading window: Dec 29th 2010 and Jan 6th 2011. Phi Turn dates are calculated using Fibonacci ratios applied to the time period between key market reversals. The calculated dates have proven very meaningful, often identifying market bottoms and tops to the day.


• Cyclic indicators, particularly the weekly stochastics indicator shows the market is overbought and topping.


• We now have a confirmed Hindenburg Omen, which suggests a very high probability of market decline. The first omen was observed on August 20th, 2010, with unofficial confirmation on Dec 14th and official confirmation on Dec 15th. The probability that a stock market crash occurs is higher than normal, and the probability of a severe decline is quite high. This Omen has appeared before all of the stock market crashes, or panic events, of the past 25 years - all of them. No panic selloff (greater than 15 percent) occurred over the past 25 years without the presence of a Hindenburg Omen.


• Most of this rally, particularly in the waning stages, has occurred on very light and decreasing volume, very likely supported by POMO operations. This leaves the market susceptible to flash crash conditions at any time.

As The Greek often points out, technical indicators should not be viewed outside of the context of underlying economic conditions, particularly when attempting to use these indicators to identify a reversal. In my estimation and based on my experience as a small business owner, the economic recovery is farcical and is not supportive of the capital investment necessary to restore real growth.

Despite suspect reports, unemployment remains up while banks are reluctant to invest in low yield US businesses. Instead, they continue to chase emerging markets with balance sheets repaired by taxpayer money, and in the process, are creating even more dangerous bubbles abroad. In my travels during 2010, I have found that even those people who are benefiting from the investments see the growth as unsustainable.

More importantly, we remain in the midst of a bond market bubble that dwarfs any other problem on the economic landscape. Any temptation to declare "mission accomplished" with the recovery would only increase headwinds in the form of inflation and higher interest rates. Any drop in the highly suspect dollar accomplishes the same. For this reason, I remain convinced that the Federal Reserve will be forced to keep interest rates low, not through QE3 and QE4, but through the deflation of higher risk assets. This will keep investors in the bond market for the foreseeable future, ensuring that bank balance sheets are protected from further, more devastating loss.

Disclosure:I am short S&P 500 Index Futures



Article may interest investors in NYSE: GS, NYSE: C, NYSE: BAC, NYSE: WFC, NYSE: MS, NYSE: JPM, NYSE: TD, NYSE: PNC, Nasdaq: TROW, NYSE: STT, NYSE: STD, NYSE: DB, NYSE: BCS, NYSE: NBG, Nasdaq: MEMKX, Nasdaq: GECMX, Nasdaq: JEVOX, Nasdaq: PEMAX, NYSE: EEM, NYSE: VWO, Nasdaq: VEIEX, Nasdaq: ADRE, Nasdaq: PEBIX, Nasdaq: GMCEX, NYSE: MSF, NYSE: EEV, Nasdaq: REMGX, NYSE: GMM, NYSE: EDZ, AMEX: ETF, NYSE: FEO, NYSE: ESD, NYSE: MSD, NYSE: EMF, NYSE: TEI, Nasdaq: EMIF, NYSE: EFN, NYSE: EMT, NYSE: PCY, NYSE: PXH, NYSE: GMF, NYSE: GUR, NYSE: GML, NYSE: GMM, NYSE: EWX, NYSE: GAF, NYSE: EUF, NYSE: EET, Nasdaq: ABEMX, Nasdaq: AEMGX, Nasdaq: APERX, Nasdaq: PMGAX, Nasdaq: PMCIX, Nasdaq: AOTAX, Nasdaq: AOTCX, Nasdaq: AOTDX, Nasdaq: AEMPX, Nasdaq: AOTIX, Nasdaq: AEMEX, Nasdaq: AAMRX, Nasdaq: AEMFX, Nasdaq: AAEPX, Nasdaq: AEMMX, Nasdaq: ACKBX, Nasdaq: ACECX, Nasdaq: AMKIX, Nasdaq: TWMIX, Nasdaq: NDAQ, NYSE: PIZ, NYSE: PIE, NYSE: PDP, NYSE: DIA, NYSE: SPY, NYSE: NYX, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: IWM, NYSE: TWM, NYSE: IWD, NYSE: SDK, NYSE: ICE, Nasdaq: QQQQ, Nasdaq: HTOAX, Nasdaq: HTOTX, Nasdaq: HTOBX, Nasdaq: JTCIX, Nasdaq: JTCNX, Nasdaq: JTCAX.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Bear Market Rally Near Completion

The Party Is Over

Wall Street Greek technical analyst Steven Ferguson offers his latest technical analysis and market outlook below. Mr. Ferguson suggests the belated bear market rally is near completion. He cites a series of technical indicators, including the infamous "death cross," which offer Greek readers ample warning of the threatening possibility of a stock market downturn. Mr. Ferguson also operates Systemata Corp., a model-based controls design firm.

(Tickers: NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: ICE, NYSE: NYX, Nasdaq: NDAQ, Nasdaq: MEMKX, Nasdaq: GECMX, Nasdaq: JEVOX, Nasdaq: PEMAX, NYSE: EEM, NYSE: VWO, Nasdaq: VEIEX, Nasdaq: ADRE, Nasdaq: PEBIX, Nasdaq: GMCEX, NYSE: MSF, NYSE: EEV, Nasdaq: REMGX, NYSE: GMM, NYSE: EDZ, AMEX: ETF, NYSE: FEO, NYSE: ESD, NYSE: MSD, NYSE: EMF, NYSE: TEI, Nasdaq: EMIF, NYSE: EFN, NYSE: EMT, NYSE: PCY, NYSE: PXH, NYSE: GMF, NYSE: GUR, NYSE: GML, NYSE: GMM, NYSE: EWX, NYSE: GAF, NYSE: EUF, NYSE: EET, Nasdaq: ABEMX, Nasdaq: AEMGX, Nasdaq: APERX, Nasdaq: PMGAX, Nasdaq: PMCIX, Nasdaq: AOTAX, Nasdaq: AOTCX, Nasdaq: AOTDX, Nasdaq: AEMPX, Nasdaq: AOTIX, Nasdaq: AEMEX, Nasdaq: AAMRX, Nasdaq: AEMFX, Nasdaq: AAEPX, Nasdaq: AEMMX, Nasdaq: ACKBX, Nasdaq: ACECX, Nasdaq: AMKIX, Nasdaq: TWMIX, Nasdaq: NDAQ, NYSE: PIZ, NYSE: PIE, NYSE: PDP, NYSE: IWM, NYSE: TWM, NYSE: IWD, NYSE: SDK, Nasdaq: HTOAX, Nasdaq: HTOTX, Nasdaq: HTOBX, Nasdaq: JTCIX, Nasdaq: JTCNX, Nasdaq: JTCAX)

Bear Market Rally Near Completion

Since the last technical analysis installment, the S&P index dipped another 50 points for 4 successive days before rallying sharply, right at the projected "Phi Turn" date of July 1st. Following that, the S&P has indeed rallied back to the 50 day moving average as predicted. Alas, the level is now about 15 points lower than it had been at the time of our last article.

At present, we see that major indices are facing stiff upside resistance, even as earnings season heads into full swing.



From the chart in Figure 1, we observe the following:

• The 50 day moving average has now crossed below the 200 day moving average. This is the so-called "death-cross" which some treat as the defining indicator of bear market conditions


• Index closing prices have been stopped for the last two trading sessions right at the 50 day moving average


• If prices should penetrate that landmark level, the 200 day moving average looms above at 1112


• Prices have also been stopped by a downward trend channel which is further reinforced each time it acts as resistance


• The rally itself is forming a bearish rising wedge pattern (better observed on an intraday chart) that has a minimum downside target of approximately 1020


• Stochastic indicators, shown below the price chart, reveal a nearly overbought condition


• Heavy volume selling has accompanied the downtrend, while rallies have occurred on considerably lower volume


• Note finally that the 13 week moving average (not depicted) has touched the 34 week moving average, a condition that has reliably segregated bearish from bullish market conditions…this is a defining moment!

If the rally does continue and S&P prices break above the June 21st high of approximately 1140, it is very possible that the April 26th top at 1220 would eventually be taken out. However, this doesn't seem the most likely outcome as the week draws to a close and the index appears overbought even at 1100.

Greek readers should consider taking any trading profits from this recent rally.



Article may interest investors in Nasdaq: MEMKX, Nasdaq: GECMX, Nasdaq: JEVOX, Nasdaq: PEMAX, NYSE: EEM, NYSE: VWO, Nasdaq: VEIEX, Nasdaq: ADRE, Nasdaq: PEBIX, Nasdaq: GMCEX, NYSE: MSF, NYSE: EEV, Nasdaq: REMGX, NYSE: GMM, NYSE: EDZ, AMEX: ETF, NYSE: FEO, NYSE: ESD, NYSE: MSD, NYSE: EMF, NYSE: TEI, Nasdaq: EMIF, NYSE: EFN, NYSE: EMT, NYSE: PCY, NYSE: PXH, NYSE: GMF, NYSE: GUR, NYSE: GML, NYSE: GMM, NYSE: EWX, NYSE: GAF, NYSE: EUF, NYSE: EET, Nasdaq: ABEMX, Nasdaq: AEMGX, Nasdaq: APERX, Nasdaq: PMGAX, Nasdaq: PMCIX, Nasdaq: AOTAX, Nasdaq: AOTCX, Nasdaq: AOTDX, Nasdaq: AEMPX, Nasdaq: AOTIX, Nasdaq: AEMEX, Nasdaq: AAMRX, Nasdaq: AEMFX, Nasdaq: AAEPX, Nasdaq: AEMMX, Nasdaq: ACKBX, Nasdaq: ACECX, Nasdaq: AMKIX, Nasdaq: TWMIX, Nasdaq: NDAQ, NYSE: PIZ, NYSE: PIE, NYSE: PDP, NYSE: DIA, NYSE: SPY, NYSE: NYX, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: IWM, NYSE: TWM, NYSE: IWD, NYSE: SDK, NYSE: ICE, Nasdaq: QQQQ, Nasdaq: NDAQ, NYSE: NYX, Nasdaq: HTOAX, Nasdaq: HTOTX, Nasdaq: HTOBX, Nasdaq: JTCIX, Nasdaq: JTCNX, Nasdaq: JTCAX.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Relief Rally on the Way?

Technical Analysis Shows Near-Term Relief Rally Potential

Wall Street Greek Technical Analyst Steven Ferguson offers his latest critical analysis of the market. Ferguson has authored a series of research articles on econometrics and programmatic trade. In this latest piece, Ferguson sees the potential for a near-term relief rally. Steven also operates Systemata Corp., a model-based controls design firm.

(Tickers: NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, Nasdaq: MEMKX, Nasdaq: GECMX, Nasdaq: JEVOX, Nasdaq: PEMAX, NYSE: EEM, NYSE: VWO, Nasdaq: VEIEX, Nasdaq: ADRE, Nasdaq: PEBIX, Nasdaq: GMCEX, NYSE: MSF, NYSE: EEV, Nasdaq: REMGX, NYSE: GMM, NYSE: EDZ, AMEX: ETF, NYSE: FEO, NYSE: ESD, NYSE: MSD, NYSE: EMF, NYSE: TEI, Nasdaq: EMIF, NYSE: EFN, NYSE: EMT, NYSE: PCY, NYSE: PXH, NYSE: GMF, NYSE: GUR, NYSE: GML, NYSE: GMM, NYSE: EWX, NYSE: GAF, NYSE: EUF, NYSE: EET, Nasdaq: ABEMX, Nasdaq: AEMGX, Nasdaq: APERX, Nasdaq: PMGAX, Nasdaq: PMCIX, Nasdaq: AOTAX, Nasdaq: AOTCX, Nasdaq: AOTDX, Nasdaq: AEMPX, Nasdaq: AOTIX, Nasdaq: AEMEX, Nasdaq: AAMRX, Nasdaq: AEMFX, Nasdaq: AAEPX, Nasdaq: AEMMX, Nasdaq: ACKBX, Nasdaq: ACECX, Nasdaq: AMKIX, Nasdaq: TWMIX, Nasdaq: NDAQ, NYSE: PIZ, NYSE: PIE, NYSE: PDP, NYSE: DIA, NYSE: SPY, NYSE: NYX, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: IWM, NYSE: TWM, NYSE: IWD, NYSE: SDK, NYSE: ICE, Nasdaq: QQQQ, Nasdaq: NDAQ, NYSE: NYX, Nasdaq: HTOAX, Nasdaq: HTOTX, Nasdaq: HTOBX, Nasdaq: JTCIX, Nasdaq: JTCNX, Nasdaq: JTCAX)

Relief Rally on the Way?

As suggested in our previous article, Monday's close did ultimately foretell the downward pressure on trading action for the entire week. By the end of Friday's session, it seemed major indices might indeed be staring directly down at a 20% drop in the near future. But just when such an outcome seems inevitable in the market, the opposite often occurs! For this reason, we share a complimentary forecast based on intraday data sampled at 15 minute time intervals:



The above forecast is based on spectral analysis of the time series data. While the method underlying the forecast has been unbelievably accurate at times, it is by no means perfect. Indeed, the method works best when the time series is quasi-stationary, which is generally not the case in capital markets, so that this prediction should be viewed for educational purposes only.

To interpret the forecast results, note also the following:

• The forecast is based on the SPY, but is scaled by a factor of 10 so that the value more closely could also represent the S&P 500 nominally


• The forecast period is for sixty 15-min intervals. This works out to be about 2.5 trading days


• Forecasts that fall outside of statistical error bands (such as this one) are usually meaningful


• Based on the forecast, Monday's open should feature major short-covering and a rally to an index high of around 1115 (SPY at $111.28)

From a more traditional view of technical analysis, we also see a charting pattern known as a "falling wedge," which is depicted in the intraday chart below:

• Note the falling trend-line depicted in solid red. This demarcates the top of the bullish falling wedge pattern


• Note that prices broke above the trend-line in early trading on Friday, then "back-tested" as the market closed


• After a successful back-test, the price should rebound as depicted by the upward green arrow above to the pattern target


• Based on the wedge measurements, the pattern target is about 30 points above Friday's close, which is also consistent with the time series forecast

Moreover, it is worth noting that the forecasted relief rally, if it proves accurate, would stop right at the 50 day exponential moving average, shown in Figure 3 below:



Compare the forecast high shown in Figure 1 ($111.28) with the current value of the 50 day EMA, which is $111.24! This suggests the relief rally will be once again stopped in its tracks by the moving average for the index.

Last, from an Elliot Wave perspective, five discrete waves can be counted in the drop from Monday's open. This would suggest that the next wave should provide relief and would likely stop at a Fibonacci retracement of 38%, 50% or 62%. Based on the high and low prices of wave 1 down, a 62% retracement would yield a relief rally high of $110.76.

We may wish to take into account the $0.53 SPY dividend of June 18th, which was distributed one trading day prior to the onset of the downward move. This value adjustment is not explicitly accounted for in the forecast or in the 50 EMA, so it would make sense to adjust the expected retracement accordingly. If we do so, we come up with an adjusted retracement of $111.29!!

All things considered, traders should look for some respite early in the week that follows, with a possible triangular continuation pattern forming by the week's end. However, given the enervated state of the economy, the current, longer-term downtrend and the increased market volatility, a long trade should only be undertaken with stop loss orders in place. And in any case, the drop towards 900 should resume after the holiday weekend, perhaps catalyzed by Friday's non-farm payroll data.



(Relevant Tickers: NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, Nasdaq: MEMKX, Nasdaq: GECMX, Nasdaq: JEVOX, Nasdaq: PEMAX, NYSE: EEM, NYSE: VWO, Nasdaq: VEIEX, Nasdaq: ADRE, Nasdaq: PEBIX, Nasdaq: GMCEX, NYSE: MSF, NYSE: EEV, Nasdaq: REMGX, NYSE: GMM, NYSE: EDZ, AMEX: ETF, NYSE: FEO, NYSE: ESD, NYSE: MSD, NYSE: EMF, NYSE: TEI, Nasdaq: EMIF, NYSE: EFN, NYSE: EMT, NYSE: PCY, NYSE: PXH, NYSE: GMF, NYSE: GUR, NYSE: GML, NYSE: GMM, NYSE: EWX, NYSE: GAF, NYSE: EUF, NYSE: EET, Nasdaq: ABEMX, Nasdaq: AEMGX, Nasdaq: APERX, Nasdaq: PMGAX, Nasdaq: PMCIX, Nasdaq: AOTAX, Nasdaq: AOTCX, Nasdaq: AOTDX, Nasdaq: AEMPX, Nasdaq: AOTIX, Nasdaq: AEMEX, Nasdaq: AAMRX, Nasdaq: AEMFX, Nasdaq: AAEPX, Nasdaq: AEMMX, Nasdaq: ACKBX, Nasdaq: ACECX, Nasdaq: AMKIX, Nasdaq: TWMIX, Nasdaq: NDAQ, NYSE: PIZ, NYSE: PIE, NYSE: PDP, NYSE: DIA, NYSE: SPY, NYSE: NYX, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: IWM, NYSE: TWM, NYSE: IWD, NYSE: SDK, NYSE: ICE, Nasdaq: QQQQ, Nasdaq: NDAQ, NYSE: NYX, Nasdaq: HTOAX, Nasdaq: HTOTX, Nasdaq: HTOBX, Nasdaq: JTCIX, Nasdaq: JTCNX, Nasdaq: JTCAX)

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.