Market Report: Bears Put Up or Shut Up
Finally we have arrived at my cited targets, 1300-1320 I have written about for a while now, although the minimum I wanted to see was a push above 1292SPX.
As we approach these highs I suspected the sentiment would change, it always does, time and time again, at extreme lows and highs the boat is tipped to one side.
It's almost criminal to suggest a reversal.
Not many want stocks when they are cheap at sub 1200SPX when I have been suggesting that we will see 1300-1320SPX in fact not many even thought that we would see 1300-1320SPX, yet here we are, and already the 1500+ SPX projections have been put out.
I have seen this so many times over the years, yet it's the same extreme, traders are bullish at the highs and bearish at the lows, but I was expecting this target zone to be hit as my work suggested it.
But now that we are here we do need to see a reversal, but from what I have seen atm, I am still liking the idea of a reversal from these levels.
Baring an aggressive push higher through 1320SPX, it still appears the markets are ripe for a reversal, based on my work and of course sentiment extremes.
Now that alone won't confirm reversal as the only thing that pays is price, but the setup is as good as I have seen over the past 24 months.
Bear Elliott Wave Count
As you can now see we have arrived at the cited area, but it's an important area for a 3 Elliott Wave count ideas. Whilst I am no fan of this wave count, it's at a point where the bears must defend.
WXY Wave Elliott Count
This has been the working count, as I still feel that a trip to the Oct 2011 lows is very possible, as the overall bounce/move from those Oct 2011 lows imo supports more of a corrective character than that of an impulsive character.
But the same story, we have arrived at the target, but now need to see an aggressive reversal.
Bullish Running Triangle
I have included an alternative set up that still suggest a reversal from this area as if wave D is being suggested, then we should find a high here and work lower, so another pattern that suggests a reversal.
Hence I like the idea of a reversal, with 3 ideas suggesting the market finds a high from this area. With sentiment extreme to one side, imo offers a low risk setup to sell the markets once a move can be confirmed to push lower.
We don't have that evidence, but I am expecting that move very shortly based on some other ideas that I think are finished.
Now of course nothing is 100%, but just like the previous highs in 2010 & 2011, not many think a reversal can setup, until it actually starts in earnest, but by then most are bearish once the move is over, as we saw on the Oct 2011 lows.
At the Oct 2011 lows, there again I was bullish looking for a low and it was almost a crime to be doing that, going against the herd, but I find myself going against the herd again.
I went against the herd on the gold rally blow off, that paid off well, I am willing to go against the herd at these levels with limited risk I think now is the time to be looking aggressively for a reversal.
The good thing about this area, is that if I a wrong it won't cost much to find out, as any seriously aggressive move above 1320SPX will start to damage the bearish case.
So sellers need to step up here and the bears defend this area, time to put up or shut up.
If I am right, then a great move lower can be seen, the least bearish case suggests a move to 1150SPX.
The only setup I see for the bullish case is a straight up near vertical rally, as we are simply at a point where this market won't hang about we are about to take a "trip to the moon".
Now if traders actually feel that is more likely, then they need to get "long and strong" here. As the bulls can't afford to carry on with this grind stuff as you are about to take off in a move what we Elliotticians call a 3rd wave, only this case it's to the upside.
However with 3 ideas all pointing to the downside, I still like the odds of a move lower and a reversal starting shortly, if I am wrong, then it won't take much to find out, as the market should be at a point where it shows some very aggressive price action higher, if the bulls want to take this higher.
One market that I feel could offer a serious clue is the DAX; it has finally met its long awaited target this past week, and looks a great setup, as its come back to its 200DMA.
From an Elliott Wave perspective it's a great looking back test.
So if the bulls really do want to own this market, now is the time they need to deliver and not falter at these levels, I would expect to see an aggressive upside move from the bulls if the market truly is on its way "to the moon".
However like the SPX ideas. I like this idea even more so as a failure here at the 200DMA will be a bad sign for the bulls, this being one of the last to take back its 200DMA.
A closer inspection reveals a virtual text book 5 wave Elliott Wave count.
So it's all to play for next week. It will need something special to derail the setup here.
As always nothing is ever 100%, that is what stops are for, to protect your account as even with the best intentions things do go wrong, but we'll keep trying to come up with solid low risk ideas.
Like the other markets mentioned, I think there is a great setup for a reversal as well on the FTSE, one that I am actively looking for a reversal now, finally this week it hit our 5750 target, so all that is needed is a reversal to help confirm here.
So like the DAX, the setup is ready and waiting, it's up to the sellers to arrive and show some evidence of a reversal.
Copper shows some promise of a reversal now, it put in an outside reversal bar on Friday, and the last time that was seen was at the Jul/Aug highs in 2011, so it could be the start of a new leg down.
If Copper goes down I would expect it to have an impact on the FTSE as well as the ASX 200 as both those markets have a lot of mining stocks making up the major stocks in each index.
With what I suspect will be a 3 wave corrective rally the evidence supports a potential new leg starting lower, and its one market that I am aggressively watching for more downside.
The HUI is at a point where it really needs to decide is it going to hold the 500 area as support or the trap door is about to be opened and puke city.
The 500 area on this market is a big area and one that I think the owners of gold stocks really need to pay attention to.
The HUI was one of the reasons I made the call to get out of gold at the 2011 highs as this had a completed pattern.
It you look at the HUI Vs gold, you can see how well they track each other.
Yet recently that has not been the case, there is a serious arbitrage going on between the HUI and gold, so much that there is a great trade setting up.
Either the HUI will get aggressive to the upside if it can hold the 500 area, or gold is going to fail to get above $1680 and fail and reverse off what I suspect is an Ending Diagonal (ED).
So what's the trade here, that's what we are interested in aren't we?
Well if gold is about to fail at the $1680 area in what could be an ED, then the trade is to sell gold, as the recent advance is looking more like a 3 wave rally and $1680 has been a big area for me.
However if the HUI is about to rally back in sync as gold gets aggressive to the upside, then the trade is to buy the HUI.
But if the HUI is about to open a trap door, then one way to capture any gains as the HUI declines is to buy DUST, that pretty much is the opposite to HUI.
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These are just a few of the ideas we are looking at. We have some great ideas on the FX markets that we are watching next week.
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The US and European stocks markets are at a pivotal and very important inflection point and one that could mark a turning point, I still continue to favor a reversal as we have finally hit my much awaited targets.
But evidence now is need from the bears to stand and be counted and defend this area, or they face a big issue as a strong move above 1320SPX opens the door to test the 2011 highs and beyond.
Gold is one trade setup that we are looking for evidence as sooner or later that arbitrage between the HUI and gold well need to resolve itself one way,
I won't go into great detail in these pages, but let's just says if the trap door opens on the HUI, and gold fails to get above $1680, there is a setup for some bad stuff to hit the gold and HUI markets, so it's important for the bulls in both markets to come out strong if they want to retain the advantage they have.
Until next time.
Have a profitable week ahead