I strongly believe what we are witnessing right now is action into the 80 week low. The problem is that this is a longer cycle low hence for it to expand by a couple of weeks or 3 weeks even can be considered normal.
Expect more ups and downs - We should hold 4500-4450 area for this low. I would like it if we can hold the 4600 area but if that breaks, then we should see 4500-4450 area which I think will hold. Oh and I should also mention that 4700 first needs to break before entertaining any bigger bearish targets. Go from point to point and dont get greedy since we are so late in this cycle. Maybe we touch 4720, go up to 4900 and then do the final down to 4600 or slightly below - dont know just speculation for now. But it might happen quite quickly.
I know that there is a lot more possibility of big downs from here - but that is what we should expect in this cycle. But being short is also not easy due to the large swings going on. I am trying to trade here but its going back and forth too quickly - hence not easy. So I am trying to mostly scalp nowadays while we wait for the 80 week low. There are some ways of confirming that the 80 week low is in - I will explain this another day but I am keeping an eye on it.
BTW, I have replied to comments in earlier post.
Best,
Lee
Tuesday, November 22, 2011
Sunday, November 20, 2011
A Review and the Week Ahead - 11/21
I thought I would start today's post with a review of the past few months, what my thoughts were, what actually happened and then what I think is going on now and what might happen in the future. I think this will be good for me also as I will be kind of thinking out aloud here.
Last couple of months or so have not been easy to navigate..But still there were lot of nice intraday opportunities and nice scalp trades out there.
Going back a bit, I think before Oct, I was expecting the 80 week low to come in sometime in November. But what actually happened was for Oct4th to show some kind of major low and put in a spectacular move out of it. The amplitude of the move out of this low was not expected for a 5 week low because a 5 week low was what I was expecting in Oct first week. The enormous rally out of that low had Sentient also confused and it started to label that low as the 80 week low which means it came very early for such a major low. You may remember the flip flopping and confusion at that time. I was very skeptical but eventually 'turned' and started to count Oct4th as indeed a major low. Once we took out 5200, I became confident that we were going to have a good rally for next few months. But market stalled at 5400 and broke down badly from there. Once we took out 5200 to the downside, I sold all cash positions and started to lean in bearish. And now..surprise surprise..Sentient also has changed its count and is thinking now that the 80week low is dead ahead of us. Infact we are very much in the time range for that low. Below is a screenshot of ST's latest view.
As you can see ST is expecting a major low right ahead. Is it already in last week? Could be..but we do not have any confirmation yet. And looking at how the momentum was last week, I think we might have some more work on the downside but it should be over very soon..Maybe next few days will do it. But price can quickly breakdown in matter of few days. Last week showed us that.
So bottom line..
We saw the last 80 week low around May 25th
The last 40 week low around Feb 11th
The last 20 week low on June 20th
The last 10 week low most likely on August 26th
The last 5 week low most likely on October 4th
So now projecting forward, we are around 40weeks from the last 40 week low and around 17.8 months from the last 80 week low. So we are well within the window of the 18month(80 week) low.
So maybe we can go up retest the 5000-5050 area again before revisiting the lows..maybe 4750 again to set low? Or maybe a bit lower to 4650-4600 area? One thing however need to be very careful here because we are in the window of the 80 week low. And rallies out of these major lows can be pretty spectacular and also very unkind to shorts.
Looking at the higher cycles. If you remember my older posts, I was thinking that along with the 80 week nest of lows, we would get the 4.5yr and 9yr lows as well. But after seeing price action over past 2 months or so, I am rethinking on this. I dont think this is a valid scenario anymore. i.e the higher timeframe longer term lows are not yet in...But we still can see a rally for couple of months in another 18 month bear cycle before it tops and goes for the next leg down. Yes too much to think right now but just wanted to put this out there because its a deviation from my original views. So what I meant to say is even though the 80week low can be bought for a positional trade, we will most likely see lower lows sometime next year. But then let us trade cycle to cycle..The smaller timeframe cycles.
I expect the bounceback to continue and then maybe we can go for one more shot down to set the 80 week low. All this can happen very quickly since we are in the 80 week low window. I will post updates if I see something different from this scenario in this immediate timeframe.
Best,
Lee
Last couple of months or so have not been easy to navigate..But still there were lot of nice intraday opportunities and nice scalp trades out there.
Going back a bit, I think before Oct, I was expecting the 80 week low to come in sometime in November. But what actually happened was for Oct4th to show some kind of major low and put in a spectacular move out of it. The amplitude of the move out of this low was not expected for a 5 week low because a 5 week low was what I was expecting in Oct first week. The enormous rally out of that low had Sentient also confused and it started to label that low as the 80 week low which means it came very early for such a major low. You may remember the flip flopping and confusion at that time. I was very skeptical but eventually 'turned' and started to count Oct4th as indeed a major low. Once we took out 5200, I became confident that we were going to have a good rally for next few months. But market stalled at 5400 and broke down badly from there. Once we took out 5200 to the downside, I sold all cash positions and started to lean in bearish. And now..surprise surprise..Sentient also has changed its count and is thinking now that the 80week low is dead ahead of us. Infact we are very much in the time range for that low. Below is a screenshot of ST's latest view.
As you can see ST is expecting a major low right ahead. Is it already in last week? Could be..but we do not have any confirmation yet. And looking at how the momentum was last week, I think we might have some more work on the downside but it should be over very soon..Maybe next few days will do it. But price can quickly breakdown in matter of few days. Last week showed us that.
So bottom line..
We saw the last 80 week low around May 25th
The last 40 week low around Feb 11th
The last 20 week low on June 20th
The last 10 week low most likely on August 26th
The last 5 week low most likely on October 4th
So now projecting forward, we are around 40weeks from the last 40 week low and around 17.8 months from the last 80 week low. So we are well within the window of the 18month(80 week) low.
So maybe we can go up retest the 5000-5050 area again before revisiting the lows..maybe 4750 again to set low? Or maybe a bit lower to 4650-4600 area? One thing however need to be very careful here because we are in the window of the 80 week low. And rallies out of these major lows can be pretty spectacular and also very unkind to shorts.
Looking at the higher cycles. If you remember my older posts, I was thinking that along with the 80 week nest of lows, we would get the 4.5yr and 9yr lows as well. But after seeing price action over past 2 months or so, I am rethinking on this. I dont think this is a valid scenario anymore. i.e the higher timeframe longer term lows are not yet in...But we still can see a rally for couple of months in another 18 month bear cycle before it tops and goes for the next leg down. Yes too much to think right now but just wanted to put this out there because its a deviation from my original views. So what I meant to say is even though the 80week low can be bought for a positional trade, we will most likely see lower lows sometime next year. But then let us trade cycle to cycle..The smaller timeframe cycles.
I expect the bounceback to continue and then maybe we can go for one more shot down to set the 80 week low. All this can happen very quickly since we are in the 80 week low window. I will post updates if I see something different from this scenario in this immediate timeframe.
Best,
Lee
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