My gold key level...

So far so good in the gold market.. though the set up still has bullish potential while the .618 support level holds up. I'd like to see the red line taken out to help solidify my expectation for a price move below 870ish...

/ES update..

This is the new down channel that I suspect we are forming, all within the context of a head and shoulders top...

Breaking it up in stages...

I'm seeing this massive Bear rally in 2 separate stages. 1st the sharp, fast ramp higher into early May, followed by the 2nd phase which is toppy, running out of strength and being faded both profit takers and new Bears, revealing itself as a head and shoulders top while RSI continues to make lower and lower highs.

Crude update..

The head and shoulders in crude is looking a bit distorted but in the Bear's defense it did deflect off of the lower channel line from below while at the same time setting up a Bearish RSI divergence and so I'm still going to hold onto my OIH oct. 105 puts for the time being. On the Gold front the pattern is better defined, I've highlighted the action in the recent past where RSI kissed the over bought 80ish zone, as can be seen usually the selling doesn't end until RSI drops under 30 with a rough minimum of 40 dollars price correction.

Gold looks interesting as well...

I seem to be seeing head and shoulders patterns everywhere...

Crude update

I like how crude got deflected away from the broken uptrend line and continues to trace out what I expect will be a head and shoulders top though not confirmed until the blue neckline breaks....

Fibs holding so far...

ok the channel got blown out but I'm staying short... 50% fib has deflected the first push plus on the hourly we see a nice looking negative diverged RSI sell signal. We also have a strong t-bond market with what looks like a head and shoulders bottom pattern which should erode some of this equity pop. The crude oil looks to be inticing some last minute bulls as it traces out a head and shoulders top...

channel still in tact..

I like the fact that the channel managed to contain the market today and once kissed rolled off it fairly hard and fast. I'm expecting 2 support levels to be broken in the near term. Today's price action amounted to raising the sledge hammer and reloading the RSI gun with a target of 885 first and then 875.. once 875 breaks there isn't much to slow things down until we get to 850ish..

S&P vs. TLT

The inverse relationship between the S&P and TLT suggests one must decide if they are an inflationista or a deflationista before placing one's bets. I'm in the deflation camp at least for the time being and so short the basic materials and energy sector while long a small amount of TMF which is pretty illiquid at the moment...

Golden Cross...

I find it interesting that a close of 850 on the sept /ES turns the 50 day moving average down and away from crossing the 200 day mva and thus avoiding the Golden Cross. Also odd that the 50th day which is to be dropped off is 850.50
When sketching in such a scenario I find that the chart lends good form and proportion but I'm viewing it with a bias...

Silver via SLV

Classic Edwards and McGee style chart and another one of my deflation trades.. long the Nov. 17 SLV puts @2.90 which I've been in for a week or so...

How I see the current /ES setup....

Summation Index update...

Not only is the Summation Index nice for picking intermediate turns in the market but also does a good job of revealing the underlying cyclical nature of the market...

Fractal update...

Interesting still the similarities between the corrective rally of 2003-2008 and the current corrective rally of the last 4 months. If I'm not staring too hard I think I'm seeing strange likenesses. I've highlighted those areas in boxes that stand out to me where the market tended to make short term highs.... we all know what came next.

OIH sell signal

The OIH negative divergent RSI signal first target was hit while at the same time punching through a lower channel line with a nice increase in volume. This suggests a target of 88-92 and with it basic materials indexes like IYM also have sell side indications which I think will feed on each other and pull the S&P down with it. In the mean time if the long end of the bond market can hold these lows and trend higher should tilt speculators back to the deflation side of the trade if only for a short term opportunity....

/es 875 first target on deck...

I had to re-adjust the channel line one more time and feel I have it right this time. The market looks to be led lower by the energy sector while at the same time seeing a nice bid on the long end of the bond market. This supports my deflation trade outlook for the time being. My first target for major resistance is 875ish which I believe will fail eventually...

Steady as she goes...

I've adjusted my channel slightly and see us pressed against the top. This short term up move is like a hammer being raised. Timing wise it suggests ugliness overseas tonight thus releasing the hammer along with RSI poised to help power it down, smashing lower into my 875ish target within the next few trading days.

Globex drift...

I'm seeing the potential for a drift higher with resistance at 915ish before we deflect off that upper channel line with a short term target of 875ish....

Sector divergences...

It looks to me that the temporary divergences in some of the key sectors are about to re-synchronize in one direction, DOWN! which should lead to something sharp and deep....

Cresting of an Impire....

I believe we are seeing the high water mark in GS and the markets in general. I'm betting that over the coarse of time as the damage to the economy caused by greed becomes understood by all Americans far and wide, the outrage and disgust will bring with it major changes in the political landscape and GS's death grip on our country will be beaten back and with it will fade into oblivion...

What's Gold trying to say ?

I'm seeing a juicy looking head and shoulders pattern playing out in Gold which to me is saying look out for the deflation trade coming up and should bode well for the long end of the bond market as well...

upward bias to the consolidation..

The upward slant to the current consolidation phase supports the Bear cause. As is highlighted in the chart below most previous corrective consolidations had a normal healthy downward tilt to them. Unless this is a massive running correction with a huge blast higher on deck then I must stick with my Bearish view of the price action....

Topping action continues...

Still maintaining my view that we are topping out and while pushing around the sketched in bars, trying the what if scenarios, I have to say the best potential near term action regards to time and price would be nice rolling swoon as sketched in the chart below....

tracing out the top...

Still no reason to cover shorts as the market continues to buck and weave shaking out weak shorts before establishing the new down trend. The way I see it, the June 2 closing high has still not been taken out and the daily RSI is still in sell signal mode.

The chart below highlights the similarities with which the market behaved at the previous short term top. Notice that the advance ended accompanied by divergent RSI also notice how one last attempted at the near term highs was attempted before fading and falling back into the short term down trend. I suspect this current topping action will prove to be the final top of this historic bounce.

Long bond signals..

Below are some charts that reflect the technical picture in the long end of the bond market. The first chart reflects how well the stock market has correlated with the bond market lately. Given that, the next two charts suggest that Bonds might be gearing up for a pretty strong rally which would mean a nice deep stock market correction. The technical picture in stocks also confirms this in my opinion. I suspect the deflation trade is back on with money coming out of the short end of the curve, as well as Gold, Oil, basic materials and stocks and onto the sidelines, waiting to buy the long end on any weakness ahead of the auction next week.

Line in the sand....

we are sitting right on that lower channel again with a pretty nice looking divereged RSI pressing into it pretty hard.. if we blow that line I'm hoping for fairly deep close...

Still no reason to cover my shorts yet..

I continue to hold short with the RSI sell signal still in tact on the daily chart. I'm expecting a bad employment report tomorrow which will spark a rally in T-bonds and sell off in stocks. Hopefully the auction of long bonds next week will go better then expected and provide further strength to the hoped for stock market sell off/T-bond rally.

The chart below demonstrates the mirror like correlation between TLT and SPY.



an intra-day look at things....

1st target @ 835ish broken...

We managed to break under that 935ish short term target and as expected the market caught a brief hold of the lower channel line. I expect that support to fail on the strength of the current bearish daily RSI reading with a target minimum of 875ish..

Maintaining my Bearish positions

Today's action did nothing to weaken the current RSI sell signal in fact new intra day signals appeared that support further the view that the top is in. If it can be said that the extreme tick level was only able to contain the Bull from running higher then the newly developed Bearish RSI signal that formed in that battle on the 120 min. chart should serve to press prices down through the 935ish target and with the daily RSI momentum signal as a tail wind should help drive the action through the lower channel and finally on to the price objective of 875ish as a minimum...

staying short until the RSI signal blows up

As I mentioned earlier I'm holding pat on my short positions as more technicals are lining up suggesting a top is in. The short term tick indicator is flashing a sell which is usualy good for 10 to 40 points however in this case it has more meaning while it lines up with an RSI divergence sell signal on the daily at the same time fib times and price targets have been met. If they manage to blow up the RSI sell signal tomorrow then I will have to cover and reassess...

June 2nd marks the next key fib time slot for a turn

plus or minus one day making it possible that today will mark the high point of the trend and notice that RSI will flash a glaring divergent sell signal regardless of how strong the close is, though I'd love to see a key reversal type finish to throw onto the pile of many reason why the top is now being formed.