Wednesday, January 19, 2011

Finally when rain came it poured..

SPX made a LH and LL and closed in the negative that is negative for the markets. The high of the day came immediately after the open Then a quick decline till 7.45 followed by a flat line till 9.20 ; a decline and rally of same proportion after that;  and a final decline starting at 10.30;  and a final flat line at the last 30 minutes was the story in SPX.  RUT was also similar.  Today was a DKOD and as such SPX could decline 3% (approximation) in the next few days.  It was a DKOD on RUT also.  Neither of them qualified to be called closing at the low of the day.  The decline felt a lot harsher than it looked because of dow not participating under the strength of IBM.  The ranges were 16 points in SPX and 22 points in RUT.  From my perspective it is a little too much for the start of the decline.  Because of this my sense is SPX should put in an inside day tomorrow with a bias to the upside and negative at close.
The chart on the left is TNA hourly.  After riding the top line of the channel from the bottom it finally gave way and fell hard.  It went thru 77 DOMA not a positive sign It also had  a DKOD and closed near the low.  It stopped at the 25% point of recent range from the last good low on Nov. 16th at 52.  Putting it differently it wiped out 25% of the work that took over 2 months to do.  Someone stepped on that sand castle. Here is theory when TNA or any stock rides a channel line from below it will fall and when it rides on top it will go up.  I will test this theory in future days. 
The chart on right is TNA daily.  In 2009 TNA rallied from a low of 30 in Nov. to a high of 48 in Jan. of 2010 and fell to 34 in 18 days.  That is a decline of 30% of the TNA value and 78% of rally range.  If I were to parallel that I get 57 as  a point that closely satisfies both conditions.  I would say time to fasten seat belts.  First bouncy point is around 68.  The arrow points to the intersection of the long term channel from March low recent from Aug 24th low.  that is at 68. The number of days in the 3 stages of the rally decline and rally after Feb. 5 th were 54, 81 and 102.  This decline by my calculation ends on Feb 11th. 
Lastly I have an hourly chart of SPX.  Wave 1 was 110.5% of starting point at 1011 and wave 5 was 111.6% of its starting point at 1173.  With respect to time wave 5 was 132% (244 hours) of wave 1 time  (185 hours).  Today's low was 1278 that is 2x9= 18 points lower.  Sq of 9 does everything in 9s.  To me it stopped on the DOMA 77 and did not go thru it.  The first support is at 1262 and the rally to 37.5% of the decline point is at 1285 and anything over that would cause me slight concern.  A healthy 50% correction of the rally from 1011 to 1296  would be to 1145.
The perma bears are all over the place.  Calling this THE end of "C"  in a 5,3,5 correction to the decline from 1576 to 666.  As the market comes down I am sure I will hear these voices become louder and louder.  However the trick is to focus and let the market dictate the trading actions and trailing stops offer protection. .
I am happy the decline started.
Thanks for reading my post.

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