Gold vrs Ags (2 week update)

http://erikmarketview.blogspot.com/2009/03/gold-ags-hedge-trade.html

March 20 (then)
DBA 25.01
GLD 94.35


April 3rd (now)
DBA 25.00
GLD 87.59

almost 8% in 2 weeks, not too shabby for a hedge trade of 2 inflation plays (which is why i picked them, b/c the risk is so low w/ these kinda hedges)

I think there alot more legs left to this, but it could very well take a few months. Not a super fast mover, and I am not "expecting" a 4% every week avg either, like it has given the past 2 weeks.

If it does, great, it not oh well....what i do expect is they will intersect/cross again, that might be in 2 weeks or it might be in 3 months. No time table set on hedge trades, the target is when they meet, per the charts. (that doesn't mean i wont take some profits if let's say gold tanks 8% in a week and dba goes up 12%, heck yea ill take profits).

But in terms of % till this trade is complete, to me its just warming up. (compare then vrs now charts)

Target: when the weekly charts intersect again. (see chart)

Is EWT predicting GOOG will miss Earnings?

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IS?, its a question. Not a statement or prediction.

For the disclosure/record, goog was my fav short during 2008, and it did VERY well for me, very well.

Yet the 1 time i shorted it in 2009, i was stopped out (ie lost money).

Reason i mention that part, is to disclosure that I do feel its extremely overvalued, and the multiple is that of a GROWTH stock in a bull market. (valuations are never a reason to make short term trades anyway, but they do admittedly make me LOOK into charting a stock, for entries to get short or long, depending on its relative valuation to the market, etc)

I'll say one thing I know for sure, there are some stocks that I call "cult" stocks, you know what i'm referring too, the ones EVERYONE "falls in love with" goog, rimm, aapl, even gs, pot even".

The same ones that Joe Bob Smith "invested" a lil in back a few YEARS back, so well ya can't tell Joe Bob his stock is over-valued, b/c well Joe Bob purchased at IPO levels...so he make one heck of a trade, there's no debating that (.....for now).

Big tech seems to follow the cult theme the most, b/c people actually DO buy aapl stock b/c they "love their ipods", and they can relate to it in that sence, and just seems like "THE thing to invest in, etc etc". That's the same reason to me, that cult stocks have the sickest ralliest, and also the nastiest falls. Because they have such a heavy "common retail investor" baseline, that LOVES to chase the rallies, and also LOVES to overpanic and oversell as well.

Point to that, is that "cult" stocks...when they rally...THEY FRIGGING RALLY, and when they crack, BOY do they friggin crack. Ya do remember RIMM was 140, then they "missed" in sept 08, and nosedived to like 40. (no wonder it was Cramer's "stock of the month for Aug"....red alert, red alert)

Well rimm was smart (imo), they also LOWERED guidance too when they missed, so they REALLY tanked. But that also got all the bad news and put it all out there and kinda got it over with too.

(no wonder they blew out earnings this time!! they put the bar way down there, from last time)

BTW GOOG does not give it's own guidance, fyi. One of the rare companies that just lets the analysts pick that, they says its "irrelevant" to the company, etc.

At any rate, I just wanted to disclose that i do have a "bearish opinion" of GOOG's stock price, that's all. Some of that due to the factual numbers, some partially also due to probably "falling in love" with how well the puts treated me in 2008, over and over again. So i wanted to disclose that, so it's evident the author has a bearish opinion. (which also makes it NOT the best stock for me to trade, b/c of that too)

So on the the EWT, something i am not an expert at, but i do dabble in and slowly adding that to my t/a skill set. As the EWT traders i follow (kenny, daneric, tiny) have been very accurate on the market, and once 804 on the spx was breached, it sure does look like they said it would if that did happen, etc.

Geez, where's the point...ok the point is when i look at EWT, and the waves, and its classic presentations, every time i look at this GOOG weekly chart i think "wow, this looks just like the book". So i figured id bring it up, to get some feedback and education as well.

And if this count is correct. (i mean looking at the chart, i don't see how there could BE a different count!!!). And assuming that if goog BEATS ER, its probably means it would send it at least temporally OVER 412 (which would violate ewt, correct?)

Gaming earnings is a terrible trade, probably the WORST in the book. (I have learned from experience, the best way). But with RIMM beating, and goog actually had their EPS raised once within the past 30 days. (fyi....last qtr goog was lowered significantly right before the earnings, like the last 2 weeks before the earnings, they kept getting lowered every other day), i have a hunch that people are assuming goog blows out, and that's mostly baked in here to it's current price.

(even though i think goog has alot more DOWNside than upside, i'm gonna run a may straddle on it, for full disclosure, b/c again when "cult" stocks move they friggin MOVE, enough to where either side will likely go well over 100%, paying for the entire spread + profits)

So......does this EWT correct????

b/c it sure looks "pure" to me

i know EWT traders have "alternate" wave counts, and most of the time when i look at their "alternate counts", they look plausable, and i can see how either fits the pattern.

But probably ya cant tell me, that goog has an alternate pattern, other than THAT chart above......lol...b/c to me it looks like that chart is about the prettiest wave structure i have ever seen"

ALT1: even tho the primary count looks 100X more pure to me, i did 2 alternates

this one is an ABC correction, so if A=C, target is 425

ALT2: Anything over 395 violates this basically, seems highly unlikely.

IMPRESSION:

If goog breaks 412.11, its has a free ticket to likely 425 (per ABC, alt1)

If goog breaks 395, alt 2 is void, b/c wave 3 can not be the shortest

(alt 2 seems very unlikely to me, b/c of the weak wave 3)

If goog fails to break over 381, its not EITHER alternate pattern, which suggests

its the Primary count, and has already topped on wave 4, and now heading

into wave 5 (below 247)

TIA for any/all feedback elliott wavers....i did the alternate charts to look as non bias as i can, and BOTH alternate counts look to me like 1000X a stretch, as compared to the primary count.

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So hence the Topic Thread Title....

VIX signals "do or die" for BEAR Market rally vs REAL Bull Trend

I had thought today would be a likely down day....end of week profit taking. (that was incorrect)

Yesterday's high (april 2nd top) was not taken out today, so to say today was "follow through" is not correct. It was an inside out candle day, as the highs were not taken out.

I have posted twice before in regards to the vix charts, this is the same theme. I do not use the vix to predict market movements. (some do, and very well).

I look at and use the vix for the clue to being able to DIFFERENTIATE between a bear market rally, that is headed back lower.....VRS.....a real intermediate term or even longer CHANGE of market sentiment shift, as that is an extremly valuable tool the vix can give us.


What The vix is telling me, from the past support lines...it's most likely going to go UP here big time. (market down), as it is now at the MAJOR support levels on the daily AND weekly chart at the same time. Established support and resistance must always be respected.

With due respect to the chart, the vix is also at "do or die time" here. As this is a huge support level.

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"IF, IF IF" the vix breaks below this key support and closes the day at 39.00 (or less), to me how i use the vix and trade...that is a "COVER ALL SHORTS" swing signal.


imo, i would also NOT consider that 36ish level as a support, b/c recall this was on that extremely low volume rally during x-mas. (looking at 36 as the main support, instead of the 39 level...is not respecting the t/a and "looking to be bearish" to me.

The more touches = the stronger the trend, so its clear that 39 is the key level that needs to hold for the bears.

I think the market goes MUCH lower from here over the next 2-3 weeks, and April 2nd high of day was a very very likely "top", and the next stop is the purple rsi main support, that's is the most likely to me. (see last post)

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However the vix chart is not to be ignored here, it can't be, and the fact its hoving a hair above KEY support, must be watched closely.

Here we are.....at the top (RSI wedge)

I posted on march 26th, we would TOP on April 2nd, and the Bears are "toast" till April 2nd. Then TURN OUT THE LIGHTS for the bulls.

So far so good, as we are a heck of a lot HIGHER now, than then....

So who cares, whats next......

IMO we are most likely going BACK to retest the main rsi support line, or "back test" the green line which we broke out from. At the angle they are both at, they will intersect "confluence" in approximately 2 weeks. I will not try and guess, only respect the support and resistance lines it has already provided us.

Tomorrow is probably going to be a down day, but that's not something to get bearishly excited about. Why? The probability irregardless is that Fridays (especially the afternoons) have a high trend to be "profit-taking", so tomorrow is likely down in ANY conditions. (that trend is the same in bear weeks, when we go up on Friday)

I was asked about RSI wedge's on yahoo board, and i think the spx weekly chart can be helpful in that explanation, to a pretty good extent.

I love RSI as a trading tool, mostly b/c like any other oscillators it can only range between 0-100. So there is no chasing it all over the place.

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RSI is commonly used as a tool to look for "overbought or oversold" conditions. However it's use in that is very minimal to me. If you look at a MONTHLY chart, you can see the RSI of the SPX stayed OVER 70 for 4 consecutive years. (ie a huge bull market). Bull markets are supposed to be overbought, as bear market's are oversold. (that's the whole point) So if one shorted the market, just b/c the rsi reached over 80, they would of been in for 3.5 years of severe pain.

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So rsi to me is worthless in that regard.

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(to look at the calculations for RSI, go to investopedia.com and type in RSI, the link is to the upper right of the blog)

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The patterns (wedge's) it develops however, are not.

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What the RSI is very good for is wedges, as it can NOT exceed 100, and it can not go under 0. So it develops many wedges, or patterns which can be used as great buy/sell signals.

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So it creates at many times "wedge's", ie a series of lower highs AND higher lows, till eventually the wedge runs small and it breaks out or breaks down. THOSE to me are the most clear buy and sell signals, of any one single t/a tool.....especially when the wedge has many touches. As they say, the more touches, the stronger the trend.

They can be used on any time frame:
- a weekly chart should produce moves for a couple WEEKS
- a daily chart for a couple DAYS
- 60 min chart for a couple HOURS

- 5 min or 1 min chart for quick DAYTRADING
....so on and so on. (THIS is a Key point)

If you look at the SPX weekly and the RSI annotations, you can likely see what i am referring too, as the past buy and sell signals.

We are now at a MAJOR rsi resistance, established from the spx peak of 1576.
- hopefully the past 2 minor SELL signals (pink,blue) are appreciated
- as well as the past minor BUY signal (green)
(those are past wedge breakdowns, or breakouts)

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**Also FWIW, the 2 red dotted (sell) lines correspond exactly to the EWT's that i do follow as the start of (3) 5 and (5) 5 down. **

3 touches = a trend, and when that trend is BROKEN (to the up or downside) the moves are very strong.

We also came within 5pts of the 20EMA, something we have not been above on the weekly in 10months. (added resistance, even tho the rsi's mean more to me)

How am I trading the weekly rsi:

I'm selling the RED line (now)
and BUYING the Purple line (if/when it comes)

Simply respecting the rsi till it breaks out or breaks down, as in previous annotations.

.....I will try to add another chart, with the purest examples of rsi wedge's to best illustrate

The absolute BEST signals are when the wedge's breaks (annotated w/ green or red dotted lines)

- selling the TOP and buying the bottom is the 2nd best, which is what we are at right now. (selling the top)

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Instead of projecting a price target, (since i trade off rsi more than price) the most likely scenario / target to me is that we go much much lower from here, till we get back to the major rsi support line. (that will likely take a 2-3 weeks, and thats a pretty hefty ways down)

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(attached is also the Russell 2000 daily 1yr chart)

which to me is the "momentum index"..when the market is good, the russell is VERY good, when the market is bad the russell is VERY bad".....triple top RSI resistance established today.

The Dollar Watch

The only UN-BIAS way to look at it, is to chart the dollar, and let the chart decide.

$USD Monthly: the 38.2% retracement level is 90.02, this could very well be the "line in the sand", that the dollar NEEDS to be broken above to prove the deflation has more longer term legs.

$USD Weekly: as you can see by the RSI, the sentiment is now constantly > 50, which is now strong support, this currently is BULLISH for $USD (ie deflation)

$USD Daily: strong support from the rising 200ma

Impression: As long as the weekly rsi REMAINS over 50, the dollar remains in a longer term bullish trend here. (deflation). What is going to be perhaps very telling is what if the dollar breaks 90.02, IF it does, it's "suggested" we go to 95, for a 50% retracement.

My personal "opinion" is that we have much higher prices to see on $USD and much more deflation left here. Even though there seems to be money being printed left and right (and oh there is!), for the dollar to NOT have totally tanked already here in past couple months, to me is a sign of relative strength.

It's not as much individual inflation as a nation we try to accomplish, as it is our inflation COMPARED to other nations. If we are mashing the printing press button, yet they are all mashing it FASTER than us. (ie: the great race to devalue one's own currency). Then the dollar will still gain in value, and the usa will remain in deflation. It's all relative, and since we are "the big gorrila", it takes alot longer for us to crush our currency compared to the smaller guys.

But that's just my opinion, more importantly let's see if/what happens at 90.02, and continue to watch the weekly rsi, which i think its the best t/a signal here for this "watch" and let it tell us what it's going to do.