Wednesday, December 28, 2011

Looking To Germany For Clues

UPDATE: Jan. 3, 2012

Well it's certainly time for a re-think on that idea.  The DAX appears to have spoken loud and clear when it exploded higher and, with gusto, broke one of the yellow trend-lines that defined the triangle.  But it did not break the one I was anticipating.  This certainly changes the landscape and obviously has far more bullish implications, in spite of the fact that it happened while the American markets were closed and no doubt on miniscule volume.  Nevertheless, the pattern has evolved to the upside.  Here's what it looks like after the $DAX popped by 4.55% in two days:

Click here for a live and updated chart

This action changes the picture in a big way with the $DAX now apparently setting its sights on the first logical resistance level of 6500.  It might also have plans on surging higher to tag the gap that occurred in the first week of August at the 7060 range.  In doing so, it would likely still remain within the yellow channel and take on a five
wave pattern to complete the upward correction.  So... when the market speaks we have to listen, remain nimble and be willing to accept that our first opinion was the worng one.

It's difficult to say whether or not the US markets have to follow.  I recently read an opinion that if the European equities markets surged, it would come at the expense of the American markets.  That isn't usually the case of course but the argument was that some of the largest investors would be in the mode to "buy Europe and sell the US".  That's one argument that I'm having trouble swallowing since it appears that the Euro is trying pretty hard to put in a bounce here while the US dollar appears about ready to break down further.  So if anything, the opposite should be happening... US equities surging while there should be pressure on European equities.  More likely, both equities markets appear ready to head a bit higher.  Why are the equities markets heading higher?  Because the markets are open, that's why.  They certainly have become one convoluted mess... a mine field where human beings don't really belong.

The S&P 500 on the other hand seems to be finishing off a 5-wave structure to complete an 'abc' correction upward.  That process looks nearly complete.  My best guess is that it has one more pop left in it and should complete within a day or two right around 1290.  Perhaps the $DAX has similar intentions.


ORIGINAL POST

There's no doubt about it, the goings on in Europe have taken center stage the past few months so I thought I'd take a closer look at the markets over there.  Well I guess I should say "market", since I believe the $DAX holds the key.  The FTSE is (and always has been) just as manipulated as Wall Street and mirrors it too closely to provide honest clues.  After all, London is the banking center of the world, right?  Ask any Englishman.  Just like Toronto is the center of the universe.  Just ask any Torontonian, he'll tell ya, lol  Ok, ok, that was all in fun.  No offense to our friends out east.  You know we in the west love ya... more or less ;-)

In any event, on a daily chart of the DAX, we're not getting any clues at all from any of the momentum indicators.  All the basic measures of momentum, the RSI, MACD and the stochastics, are all pretty much in neutral territory and 'could' evolve in either direction.  And no matter which way they decide to go, nobody would have any right to claim that he's "surprised".  The moving averages are doing the same thing, grinding themselves into a dribble that's headed due east.  And of course all these symptoms are absolutely typical of a consolidation phase.

Elliott Wave theorists will look at the chart below. apply their magic to it, and come up with their own counts and expectations.  I respect them all, because even though they would likely produce several different counts with several different outcomes, it's not an easy art and it takes a lot of patience and vision that can conjure up all kinds of alternatives.  Quite frankly it's the alternatives that constantly have me questioning my own work because 90% of them, when viewed as a standalone without reference to the other options, seem to make sense and can appear to be quite convincing.  I'm just not very good at that.  I'm just not a good waver.  In fact the last time I did any seriously good waving was when the bus carrying the South Okanagan Bikini Team drove through town.

Click here for a live and updated version

So taking a look at the DAX with a clear slate and just considering basic old school chart patterns, the potential for a seriously big downdraft seems quite possible... and probably more likely to happen than not.  I honestly don't think it's reasonable to expect the triangle in the chart above to break to the upside in spite of the fact that the spigots have been turned wide open at the ECB.  Some have claimed that the recent emergency funding in Europe is the equivalent of quantitative easing in the US.  Perhaps so, but I don't believe we can expect the same result.  IOW, I'm not so sure we should be expecting those funds to be filtered through the European equities markets.  It just seems to me that they have a lot of other areas where those funds are needed a whole lot more desperately.  I'm not sure they have time for filtering. If the resolution turns out to be to the downside, the measured move would have the DAX attaining a minimum target of about 4515.  But in the larger picture, I also don't think it's unreasonable to expect the next leg down to be approximately the same length as the first leg lower down into the triangle.  In that case, the DAX could ultimately end up sniffing for a bottom somewhere in the area of 3050 and with a preliminary target date of approximately March 13th, 2012.  First things first of course.  We need to see which direction price action breaks out of the triangle, but if it's to the downside, I'd expect 4515 as the first stop and darned near assured.

But to be perfectly up front, I have to admit that if I look at the chart without taking the 'old standard' into consideration as I've drawn it, I couldn't argue with an Elliotician's declaration that a whole lot more upside is required in order to complete an 'abc' correction upward off the September low.  So what it all boils down to is "who's right?"  He who argues for more upside or me who argues for a break to the downside?  I don't know yet.  And neither does anybody else except perhaps for those who are privy to Goldman Sacks' playbook.  Yes, they control that market as well.  Alessio Rastani agrees.  So either way, until we see one of those yellow trend lines be broken one way or the other we really won't know.  The triangle is the key.

  .

20 comments:

  1. In that case, the DAX could ultimately end up sniffing for a bottom somewhere in the area of 3050 and with a preliminary target date of approximately March 13th, 2012.

    New LTRO from ECB on feb.29.
    http://www.acting-man.com/?p=12777#more-12777

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  2. Thanks for the link Anonymous. Unfortunately for me, I have to admit that I don't really understand where that money goes (referring to its 'path'). Even when the quantitative easing plays were going on in the US, I didn't really understand what was happening... why the primary dealers suddenly found themselves flush with new found play money which in turn found its way into equities markets. It didn't sound logical to me because I thought that money was intended to save somebody's sorry ass. Nevertheless, and perhaps I'm wrong about this too, but I don't think we should be expecting the Euro bailout money to flow into European equities markets as it did here. But most likely, that's simply because I'm a moron on that particular topic.

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  3. Excellent post Albertarocks, thanks for sharing that. I haven't looked much at the DAX, but it makes sense that one is key to watch. They are one of the leaders (down). And until it picks a trend, I think we get more of this sideways slop. And I agree with your hunch that the European QE money doesn't find its way to equities. Just as QE3 would likely not have the same result as QE2. Just based on psychology -- we've all now seen that it was temporary, and back in 2009 and 2010 people thought it might work, or weren't sure what it meant.

    Thanks again, and Happy New Year to you! May it be healthy, joyous and full of abundance!
    Cheers!

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  4. Haha, nice to see you buddy. Happy New Year to you as well. One thing I believe in with 100% confidence is that there is no reason, absolutely 'no reason', why 2012 can't be good to those of us who are at least paying attention. It's the other 99% who I really worry about. The people in your office that you told us about, some of your friends that you told us about, my sister, my friends. Not to mention all the people who have their money invested with hedge funds run by managers whose only prerequisite required to get that job was to agree to be lobotomized so that the concept of deflation has been removed from their understanding. Either those people are going to get slaughtered or else they're going to be the luckiest people on the planet over the next year and won't even realize how close that bullet whizzed past their ear. Nor will they realize that there's another one on the way.

    Speaking of the $DAX, yeah for sure I think that's where some focus is required. In fact, this morning I started working on an analysis concerning the DAX and the entire European financial district. And wow... there are some seriously good indications emerging from that study. Clearer clues than I'd hoped for.

    I hope to publish an article on that later today or tomorrow. I have the luxury of a couple days off so I can spend some relax time trying to write it better than I usually don't, lol. In fact, the findings are so interesting, maybe even "important", that I might save it for a day or two and publish it out there in the world somewhere where a whole lot more people who might be interested can see it. If I get lucky, maybe MoneyMorning will even pick it up like they did one other article I wrote. I'm not going to hold my breath on that one though, lol. Actually if some huge site was going to publish 'any one' of the pieces I've written lately, it should definitely be the one coming out on Tuesday.

    Too bad I didn't have this little blog going at the time because with a mailing list of 700,000, MoneyMorning represents some pretty damned good exposure, lol. Mind you, I didn't even want to start this blog in the first place, so I didn't really give a rat's arse about exposure. I only started it because... well you know why. I hate trolls with a passion. In any event, this little site is getting a hell of a lot more visits than I ever imagined so maybe I will pump an article or two out there into the real world and see what happens. In fact, stay tuned for a re-visit to the $CRX article. A whole lot has happened on that front and I'm almost 'excited' to show the world what it is, especially considering that they've already read the first article on that topic. GEI reported that it became the #1 article published in their investment blog section over the past half year. I'll be honest, that shocked the ever-living poop out of me. The re-write will be published on GEI and on this blog at the same time... Jan. 3rd.

    Thanks for dropping in Greggor... all the best my friend. Get that crazy Aussie to drop in too if you can. He's always a lot of fun. By the way, that reminds me that you and I were talking about maybe setting up a post based on currencies. My apologies that I just haven't concentrated on that... yet.

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  5. Good post Albertarocks. We will see very soon, that triangle is about to break. And you do wave; i.e. "I'm just not a good waver. In fact the last time I did any seriously good waving was when the bus carrying the South Okanagan Bikini Team drove through town." Very funny...

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  6. Wow. It's a bit of a surprise to see you pop in Katzo (damn, I don't want to call you that, lol). I'll forever think of you as an Italian kid that became my first friend when our family moved from a small town to a city shortly after my 10th birthday. His name was Angelo. But welcome. Nice of you to drop in.

    Haha, I wasn't exaggerating by much. The weather in the summertime up here is really nice, particularly in the interior of B.C (Okanagan area). So with so many beautiful big lakes, hot weather and resort-type towns the bikini babes are pretty darned spectacular. Worthy of a wave I assure you, lol.

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  7. How long you been trading? I have been trading for 30 years, was a buy and hold person until volatility taught me a lesson. Been doing EWs since 2007, very fortunate because my teacher set me up to be short for the great debacle. Tripled my acct. during that period in a month with options.

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  8. And trolls, don't get me started. I have one who follows me around that has 8 different persona now. But there is a positive, this person is the best fade I have ever seen. I call it the Wrong Way Wanda Contrarian Index (he/she posted a negative reply to you). Perfectly called a ST top at Dec. 28 with "look out above, 1320 up next." Ppl say online stuff they would never say to your face...

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  9. I actually got real interested in the stock markets when I was 11. Started learning a little bit about TA at that age but it was an 'off and on' thing. I came from a very poor (but loving) family and never did have any money to work with even though I eventually ended up with a great hard working wife and a solid education and good job of my own. The wife is no longer my 'wife' but instead is now a great friend. But raising two awesome children in athletics took every penny we ever made. It was money well spent if I consider the successful people our kids have become. Our daughter was essentially a shoe-in for the Olympics in Athens but sustained an incredibly painful back injury one year before the games... and that was the end of that dream.

    But I first started trading barley on the Winnipeg futures exchange in about 1986. Took a foray into sugar and currencies. It was a steep learning curve that's for sure. No computer, no charts except for the ones I drew myself and no source of real time quotes. Needless to say I blew up an account more than once. There's no doubt in my mind that the most important lesson a trader needs to learn is how to loose a ton of money. Once those lessons are learned, you know what 'not' to do, lol.

    As for trolls, I don't even really want to talk about them here. One comment by any person that even comes across as disrespecting or attacking another and bang... they're gone for good. Zero tolerance here. I'm fed up with it. Even if it were to end up that nobody comments here at all, I'd be just fine with that rather than have to listen to the scum of the earth attack others. Two of the worst offenders on the site where I met you even followed me to Seeking Alpha and tried to sully my great reputation over there. I just shot both of them in the face with the troll gun and that was the end of that problem. I won't put up with it... period.

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  10. Don't get me wrong though, friendly banter and kidding are absolutely welcome. So is disagreement, either between any two people or between anybody else and myself. Of course that would be perfectly normal and healthy dialogue. That's not what I'm talking about though. I'm certain there's not a single person out there in internet land who doesn't fully know and appreciate the difference. It's all about respect. People either have to exhibit it or get lost. You want to see a perfect example of a great, great site? Try this one for size... an awesome site run by an awesome guy. Not to mention super talented both as a practitioner of EWT and as a 'writer': Pretzel

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  11. Agree, there is respectful and professional disagreement and there is the 'other.' Civility has gone to hell on some sites that do not police proper behavior, Daneric's site displays some of the worst I have ever seen. SOH used to be that way, they instilled a registration process, I used to be a monitor there. Ther eis little content there. I have had personal info posted about me by my 'current troll' Fergie, who I was. Then he/she would come at me with her then 7 persona so it looked like it was diverse group; but Atilla pointed out it was all the same IP address.

    Best to take a hard line on this stuff and clean it up fast, perhaps providing one warning, then 'bang,' gone.

    Pretzel's site looks good, thanks.

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  12. Katzo7, I hope you don't mind, but I responded to you on the "Where friends gather" post. The one with picture of the mug full of cold beer. Once that thread is full enough that it starts to become cumbersome for a computer to load, and I decide that I should start up another 'pub' space, the beer glass will appear as empty and a new full one will appear on a new post. So if people want to meet up and talk about generalities, they can just go where the full cold beer is... anytime, lol. Also, that way commentary here can remain more or less about the post on this page (the DAX analysis in this case). Please don't be offended, I'm just trying this whole process our myself. See you in the pub.

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  13. Hey AR, good luck with your writing ... excellent that you have the time to focus on it! I'm sure it will get a lot of interest, whatever the channels. No doubt. Me and many others. I'm not surprised that your commodities article was #1. Glad to hear it, and congrats!

    Yes, I'm very worried for what could happen to the masses. As I watch people at New Years Parties ... most probably oblivious, and I'm remaining more silent on the topic. Except for family or close friends. I don't have the energy for too many of those conversations.

    Similar to the troll topic. It sure is nice in here. Energy is too precious to waste that way.

    Hey, I just bumped into something that I didn't see before. The AUD/USD on the monthly chart has a cross over on the MACD. First one in 2 years, and looks like it confirms the trend change to down. My teacher found that long-term MACD change to be a very reliable indicator (but rare) of a trend change -- an a long term trend coming up.

    Anyway, gotta run, I'm a bit tired from staying out late last night. G'night!

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  14. Thanks Greg, but unfortunately I don't have nearly the time to dedicate to it as I'd like.

    Yeah, it's nice and quiet in here and the frosty mugs are great. Not many people have dropped by and that doesn't disappoint me one iota. All I really wanted to do was to create a space where I could post some analysis just like I used to do on the other site. Only without all the negativity. If it weren't for the arseholes over there, I'd still be there posting 20 times what I do now. And then, just for general conversation, I created that little pub "where friends gather". It's just a quieter space where friends can chat and be able to focus without all that other nonsense. Almost like a nice quiet pub, lol.

    G'night bud.

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