Archive for May, 2011

Market Turning Points | Andre Gratian | 2011-05-30

Posted in education, technical analysis on 2011-05-30 by Strategesis


On Tuesday 5/24 the SPX started another near-term uptrend from 1312 which reached 1333 by the end of the week. Is there any chance that this rally becomes a legitimate end to the correction? Maybe! Because the 14-15-wk high-to-high cycle is due to top in about a week and, assuming that it is the cause of this rally, and that it will bring about a high and not a low, the upward push could extend by several more points until the cycle has made its high (ideally 6/6). Then, a reversal should take place, perhaps bottoming on 6/13, the date on which the Armstrong 8.6-yr cycle is due.

Using cycles for market forecasting can be helpful, but I have learned to take them with a grain of technical salt, meaning that, based on experience, I take the cycles into consideration, but rely primarily on what my technical indicators are saying; especially when several cycles are clustering in a narrow time frame (like now) — and some of them have a history of inverting!



A Look at the Coming 6-Year Cycle Peak

Posted in education, oscillators, time cycles, trend channels on 2011-05-29 by Strategesis


Although the long-term economic trend is contracting, we’re currently passing through a small window within the yearly Kress cycles which began at the end of 2008 when the 6-year cycle bottomed. The bottom of this important cycle lifted a sufficient amount of downward pressure from the financial market to allow for a temporary reprieve in the de-leveraging process which began in 2007 with the credit crisis. The nominal force behind the credit crisis was the metastasis of toxic debt but the impetus behind it was the long-term yearly cycles which compose the Grand Super Cycle of 120 years and is scheduled to bottom in late 2014. The final “hard down” phase of the 60-year component cycle, for instance, began in 2007-08.

With the bottom of the 6-year cycle in late 2008 and the corresponding “good years” of 2009-2011, individuals and institutions have had an excellent opportunity to get their balance sheets in order and expunge debt from their lives as much as possible. The 6-year cycle is scheduled to peak in October this year but as Mr. Kress has emphasized, it’s a possibility that the weight of the long-term 30-year, 40-year and 60-year cycles could end up foreshortening the peaking process before October. It’s important therefore to be prepared for the eventual end of the Fed’s loose money policy and the closing of the 6-year cycle window, the effects of which should be felt within a few months.


Market Turning Points | Andre Gratian | 2011-05-22

Posted in education, technical analysis on 2011-05-23 by Strategesis


The near-term pattern which is being made by the SPX suggests that the low of the correction may have been 1319, and that a break-out from its corrective channel may be imminent.

This is supported, in part, by the sentiment index which has grown more bullish over the last week, and the charts of GLD and USO which may be ready to start retracing their recent decline.

If the SPX extends its down-move below 1328, it will put the break-out scenario in doubt or, at least, delay it.



Posted in education on 2011-05-22 by Strategesis


‘The average amateur trader believes the stock market is guided in its trends by a certain mysterious ‘power,’ this belief being the one factor, next to impatience, most responsible for his losses. He reads tipster sheets avidly; he scans the newspapers industriously for news likely, in his opinion, to change the trend of the market. He does not seem to realize that by the time the news of real importance is printed, its effect, so far as the basic trend of the market is concerned, has long ago been discounted.’


Demystifying the Volatility Index

Posted in education, technical indicator on 2011-05-15 by Strategesis


The VIX is calculated by averaging S&P 100 Stock Index at-the-money put and call implied volatilities. The availability of the index enables investors to make more informed investment decisions. Going over the VIX history along with the S&P 100 OEX index it is quite evident that all of the spikes in volatility accompanied market downturns and significant events that affected the market.

(Click on image for larger view)


Market Turning Points | Andre Gratian | 2011-05-15

Posted in education, technical analysis on 2011-05-15 by Strategesis


After reaching its 1370 projection, the SPX started a consolidation process — which is normal. The stock market progresses through a process of accumulation-uptrends, distribution-downtrends, which repeats itself continuously in various degrees over various time frames. Elliott came to the same conclusion when he identified corrective and impulse patterns as the basic frame work of the market. Point & Figure charts give us a much clearer picture of this process than bar charts. In addition, they have the capacity to tell us how much energy is stored in these accumulation and distribution phases, and how far the following move is likely to carry.

Based on a conservative count taken across the 2009 base, the top of the bull market could be as low as 1365, or substantially higher if the liberal count prevails.

Since the index has already reached 1370, we know that the conservative count has been filled, and that we could be at a bull market top. Are we done? Probably not! As the trend develops, there are periods of consolidation which are known as re-accumulation or re-distribution phases that are very helpful at projecting the extent of the next move. Several of these past patterns point to another push higher before we get to the end of the current intermediate trend. I am going to assume that they are correct and that the consolidation which is underway is only a precursor of the next uptrend.

Let’s go to the charts and see if we can find some justification for this premise.


The USD has formed a bottom of some significance. How long will the bottom hold?

Posted in technical analysis, USD on 2011-05-14 by Strategesis

From (by Toby Connor):

Despite my bias to see new all time lows in the dollar index, I think the dollar probably put in the three year cycle low last week. Sentiment at the time had reached multi-year lows and as of yesterday the dollar had moved back above the 50 day moving average.

If I’m right then this should usher in the next deflationary period just like the rally out of the ’08 three year cycle low signaled a coming recession, the next leg down for stocks in the ongoing secular bear market, and a collapse of the CRB into its 3 year cycle low.