Month end

April finished the month selling off of significant Fibonacci Retracement numbers.
The Dow Jones Industrials tagged the 61.8% level before selling and closing in a shooting star candle.
The S&P500 came just shy of tagging its 61.8% giving a similarly bearish candle as that of the Dow.
The Nasdaq Composite retreated from a 78.6% retracement
And similarly, the Russell 2000 sold off from its 78.6% retracement

lol

This is getting to be quite laughable really. For every move down the market makes it ends up making two back up (and typically via gaps).
Looking at the SPY with the Up/Down volume differential demonstrates the matter nicely:
Notice also that we are perhaps forming an expanding top pattern. So, if we make new highs in the next few days there's a good chance of a strong move down.
Besides, we have an overhead Median Line of a pitchfork that goes back to October of 2002 (also using the highs of 2007 and lows of 2009 as the remaining two pivots), coinciding with a multi-pivot overhead median line.
By the looks of it, this weekly SPY chart still looks like it's in Wave 3, no?

2b reversal

Large volume today on a trend day down. A few things of note about today:
Today registered the lowest Up-Down Volume Differential since March of 2009 (before the technical bottom).We also registered, the highest TRIN reading since Dec. 2009 as well as the lowest TICK reading since Feb. 05, 2010 (the bottom of the previous correction).
All signs pointing to an extended correction?
I have had this 60-min SPY chart up a couple of times, showing the range we've been in since February in an Andrews pitchfork. Today we finally sliced through the lower median line and price actually bounce at the 50% and 75% warning lines (the white dash lines extending below the solid yellow Lower Median Line).
Today was a 2b reversal day after price failed from it's new highsAlso of note was where we corrected on a broader perspective. Take a look at the SPY weekly chart and how Support & Resistance interchange as a pivot. I also couldn't help but throw in an Andrews pitchfork for good measure, of which we (so far) just fell short of the mid-line).Take a look at where the highs on the Q's currently stand

Euro Update

A self-explanatory chart of the Euro futures as an update to my previous post.

action reaction

The fundamental concept behind the Andrews Median Line (Pitchfork) is that of Action-Reaction, and as such can be broken down into vector analysis. It is not some useless drawing tool as I once thought it was. It is very much a way of marking a path in which price is likely to travel following a momentum shift. Much like the law of equal and opposite reaction, as price initiates an impulse followed by a pullback followed by continuation in the direction of the original impulse, the Median Line is a means to mapping that phenomenon.
Two recent charts that have caught my fascination are those of the Euro futures and the Dow Jones Industrials with an Andrews Median Line overlay. Of course this isn't a buy here, sell there type of tool, but used in conjunction with Support/Resistance and other price indications it can be valuable in terms of targets and determining price strength or weakness.
Recently the Euro has shifted into a downward slide. Once you have the initial 3 impulse points you can draw a road map for potential price trajectory. I have been following this chart for over a month now and have been quite impressed with the way it has contained price within the Median Line boundaries. Especially curious was the way it reacted off of a test of support. The 1.3250 was a previous support area, and after slicing through that to test 1.3200 the 25% warning line gave a potential support target. The short covering that ensued at this 1.32 level found resistance back at the pitchfork's mid-line, before rallying all the way back to the upper median line, where more profit taking occurred.
Next is the Dow Jones Industrial average on a monthly basis going back to the 1920's. Of course I used a log-chart to give a better depiction of price over such a long period of time. I also used a variation of the Andrews Median Line known as the Modified-Schiff variation (an available option in the Tradestation software). This variation to the Andrews pitchfork is used in cases when the price anchors used result in an overly steep projection.
The price anchors used are (1) the impulse off of the 1932 market crash lows, (2) the wave 5 termination highs, (3) the ABC correction lows. So, you have your 5-wave momentum impulse up (action), followed by an ABC correction down (reaction). Here's what you end up with; it slips out of the 25% warning line in the late 90's, but come on! Look at that bounce off of the mid-line in 2009!!

euro hit

The Euro slipped through recent lows, but not before bouncing at that level earlier today.

even little dips get bought

While it seemed like a correction was in the works for today, yet another dip was ferociously bought. As if, after having missed the 42% run-up (in the SPY, 60% in the Q's, and 52% in IWM) every little dip is being bought in fear that "they" will miss out.It felt as though a mild correction was blowing in, as profit-taking here seemed rational, but once overhead stops were hit and the gap started getting filled, further upside probability outweighed that of down-side.
As negative as the morning looked, the TICK wasn't all THAT bearish. When it came time to test the lows, though TICK registered lower, price put in a higher low (reverse divergence).As price began to crater after returning to the opening range, volume surged on vwap (shenanigans!).
We then formed an ascending triangle and broke out on what was likely a combination of stops being hit and new longs entering.The Fib. retracements on the above chart are snapped off of a seed wave.

Meanwhile, here are some charts using the Andrews Median line. First the SPY 60-min showing some precise boundaries between price and the median lines:Next, the Q's. Notice that price has in the past enjoyed time spent between the upper median line and a 25% warning line (on average about 10-days).

And, in summary, there's this ridiculous chart. 8% and counting:

value area

The SPY came in to test a previous range of congestion, resulting in interested buyers.
Here's a chart of the Volume distribution, highlighting levels of previous VPOC's, giving us a congestion band to work through. The idea being, if the market were very weak perhaps we would have consolidated here before continuing lower. The fact that buyers stepped in gives potential for further upside testing.Here's where that band lies on a daily chartOn an intraday basis, this band coincided with the previous day's low (PDL). Once testing this band price found resistance at the day's Open price, put in a higher low (W-bottom), and extended back to the day's highs.
The Fib. lines are drawn off of the seed wave to give potential targets.

Looking for Support

...or is it resistance?
Looking for support in a strong momentum move can be pretty straightforward (so long as support holds ;). What we had to go on in today's SPY sell-off were prior consolidation ranges, between $117.50-$119 (Resistance-becomes-Support). After having potential targets in mind, it becomes a matter of watching for selling exhaustion (TICK divergences and higher lows within your target boundary).Here's a look at the SPY daily price congestion rangesHere's a look at the volume profiles, showing the primary congestion range
What's really interesting is the following monthly chart of the SPY. The $119-$120 level (where we found support today) coincides with a mid-point of the S&P500 going back 12 years. Also interesting is how the above chart looks a lot like the one below...so, is the current phase finished, or only half-finished? :)


The QQQQ closed the week just under the $50 mark:One further observation;
The Dow closed just barely above the 11,000 mark. Take note of how long price has previously bounced between the 10,000 and 11,000 levels before:

OpEx update

Some updated charts continuing off of yesterday's post. The basic theme being that a seed wave tends to terminate before the 261.8% Fib. retracement. There were also some nice bounces within the Andrews Median Lines.
The SPY dailythe SPY intraday
The Q's daily (purple bars indicate OpEx)

Forks, seeds

Though I risk alienating the ten people that actually visit this blog, my posting has been reflective of my trading lately (disinterested). Perhaps it's the change in season and the warm weather is keeping me away from the computer for any amount of time more than need be. Anyway, I believe these moods go in cycles, and at the moment I'm cycling back into interest, though there's not much worth noting in this relentless melt-up we find ourselves.
I'll add two things today that touch upon previous and recent posts. One is an Andrew's pitchfork, and the other the seed wave concept.
First the forks.
Here's a 60-min SPY chart showing the Andrews Median line giving nice Support/Resistance boundaries:Meanwhile, here's a daily QQQQ chart with an Andrews line going all the way back to the March lows...Price has found it's way back between the Upper Median Line and the 25% warning line. The bars painted purple indicate Options Expiration which is coming up this Friday. Curious how frequently price has traded in the upper median line extremes during OpEx in this past year, curious indeed.Now to combine the two topics of a seed wave and Andrews line.
Below is a daily chart of the SPY. The Andrews Line goes back to the March lows, while the Fibonacci retracement lines are based on the most recent seed wave that started in February (go back and read this post if you don't know the seed wave concept).As "trend's end in a climax," somewhere in this range would be a good place to do so.
Oh, by the way, the Q's are a mere 8.9% away from their Nov. '07 highs! That's just extraordinary.

seed wave

A quick read you might want to check out;
New Frontiers in Fibonacci Trading by Michael Jardine

In it Michael Jardine (of enthios.com) introduces the concept of Market Structure Highs (MSH) and Market Structure Lows (MSL) that then give birth to the Seed Wave.
First, the MSL and MSH. Quite simple really;
Market Structure High = A High, followed by a Higher High, followed by a lower high which ideally closes lower than it opened. This pattern forms your market structure high.
Market Structure Low = A Low, followed by a Lower Low, followed by a higher low which ideally closes higher than it opened, this pattern forms your market structure low.

Below is the SPY market with MSHs (Blue down triangle) and MSLs (Green Up triangle);It's important to keep these structures in context. You would be looking for a MSH as an indication that a prior Up TREND may be reversing or correcting. Likewise, you're looking for a MSL as an indication that a previous Down TREND may be reversing or correcting. So, a choppy, sideways market may contain these price patterns but that doesn't really fit the context of this concept.
Next, we look for these structures to trigger. In the case of a MSL, a long trigger entry occurs once price exceeds the high of the third bar in the series. Like so;
The reverse is true for a MSH. A short trigger occurs once price exceeds the low of the third bar in the series, like so;
Once we define a potential weakening of price we wait for the first wave to form. When we see a Market Structure High, followed by a Market Structure Low, followed then by a lower Market Structure High, we then have our "Seed Wave". As this second MSH forms we then look for our trigger short entry based on the above criteria.
Here's an example from a trade taken in FCX today: The first MSH labeled on the above chart is actually a lower MSH than the previous swing high occurring on the open last Friday, so perhaps you may have been looking to short the trigger on that series.

Without giving away too much from the book, the lower MSH (or higher MSL) is always a Wave 2 in a 5-wave structure. Once you have this seed wave you can then draw Fibonacci Retracement levels to give you potential targets. Since the lower MSH (in the chart above) is wave 2, you look for a termination of Wave 3 as your first target. According to Michael Jardine, the W3 termination occurs between the 138.2% - 161.8% retracement levels (snapped off of the W1-W2 high to low). While the termination of W5 occurs around the (223.6% - 261.8% retracement levels).

The battle rages

I've posted this chart a number of times;The Q's have been testing these July '08 highs for the past 3 weeks now. Two weeks ago they were extended tests that were quickly (and with reasonably large volume) rejected. Last week, price nudged a little higher and swiftly sold off, all the way back down to the $47.80 support level (even put in a higher low). This week, however, price has turned that resistance pivot into support. Price attempted a breakout yesterday only to turn into a reversal. Today, as price tested yesterday's highs selling again ensued, only this time price turned around at the previous day's low (Resistance becomes Support). Worth noting is the large volume surge that came into this rejection. It appears there was even greater volume keeping price above $48.40 (prior resistance last week) than there was bringing price down to that level. As an aside, the Q's are only 11.7% off of their 2007 highs!

Just some charts

The inverse correlation between bonds and equities continues. The chart below using TLT and SPY as a proxy for Treasuries and the S&P respectively:Curiously, the 10-yr just broke down from an Andrews Trigger Line

The SPY just keeps creeping up the Lower Median Line as
And the Q's, well a move up into the warning zone (right around $50) in the past has resulted in some unbearably choppy price behavior.

RIMM median line failure

A quick look at RIMM following Friday's sell-off (seems a theme following their earnings announcement). Yet another way in which the Andrew's Median Line can clue you in to the strength (or weakness) of a rally (in this case, the momentum thrusts starting in February, ending at the $75 mark).
Using 3 pivots; November lows, December highs and January's higher low, we can construct the Andrew's pitchfork.
The fact that price was unable to reach the Median Line (dash middle red line) was a good indicator that strength in the rallies was lackluster.A fluke you say? Well, if you don't want to take Andrew's word for it, take a look at what Fibonacci was saying;
The dash yellow line on the chart below is a Fibonacci Extension line.
The dash white line is a Fibonacci Retracement grid.
We can see how, in February, price resisted the previous December swing highs that corresponded with a 61.8% Fib. Extension and came close, but couldn't quite tag the Andrew's Median Line. Price, however, consolidated at those highs (sign of strength) before pushing higher. Price again fell short, not only of the Andrew's Median Line target, but the Fib. -38.2% retracement and the 100% Fib. Extension, screaming weakness (that shooting star doji was the last straw 4-days ago).

More Median Lines

Of course after yesterday's post regarding the Andrews Median Line I have to now obsess over it and use it all over the place.
So, on with the charts.
Starting with a 30-min chart of IWM over the past 3-weeks. This one containing 3 forks (color coded in their labeling). The larger one (teal) has a trigger line drawn off of it being that price hasn't touched it's Median Line, so a short setup would be entertained should price close under the lower trigger line (all explained in yesterday's post). Today's open put price right at the Upper Line of the Red fork where price was rejected and we based around the yellow fork's median line before breaking down. I included the 3-cycle stochastic just for shits-and-giggles.Looking closer on a trigger chart (5-minute) the Lower Trigger Line (LTL) is retained (teal line) to show how price based along this level before breaking down. The lows coincided with the Previous day's close on a momentum divergence, leading to a short covering rally back above the LTL. Unfortunately when I pressed the button to short this, I got the "Order Rejected" prompt, not cool.Here's a look at the SPY 15-min chart with 3 forks on it:Now to the Q's. I've been posting this chart lately, as we seem to be bumping up against this resistance level.Here's a look at the 10-min chart where prices were sold at that $48.57 level. What's curious is the volume surge we saw come in this late afternoon. Merely a short-covering before the long weekend?While price is just basing around...maybe we'll get a climactic gap up come next week.
If we were to gap up next week and test that $50 area, it fits right in with previous extremes on the 'ol Andrews Pitchfork:
And finally, take a look at the weekly stretching back to the bottom in '03. The median line acted as resistance on the first touch, before price came charging back above.