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

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:

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).

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).

back forth testing

These past two days in the SPY gave nice, clear cycles as explained in the Stevenson Price & Time concept. Starting with the nice arching Regular Cycle from yesterday, this morning's Inverted Cycle quickly achieved it's upside PTT, while the next Regular Cycle came awfully close to tagging it's price and time target (this sort of cycle analysis isn't meant as a stand alone strategy, so if you're short on the last half of this RC a better profit target may be the day's Open). Later in the day we got some smaller time frame cycles interspersed so the symmetry began to fade.
Interesting setup we have on the Daily SPY chart, with a confluence of resistance points.
- We have price sitting in the sweet spot of a Bearish Wolfe Wave where the time objective comes around tomorrow.
- A blatant momentum sell divergence
- 161.8% Fibonacci Retracement level
- 100% Fibonacci Extension level
All as volume has increased these last two days.

now what

Where do we go from here? The bears were squeezed yet again, bringing price back to the January 21 selloff point. If only I had the courage of my convictions, I would have been a lot better off after this last month, remember this chart? and this one? Anyway, lesson learned. You have to be quick and play off of what you see, not what you think.
There was a day back in September of last year (see this post) that has haunted me ever since sitting through it. It was a stark reminder that anything can happen in these markets, regardless of what the news is, how the economy is performing, or how strong the dollar may be. It was also a lesson in watching stops get taken out while seeing fresh orders come in for fear of missing out.
There comes a time when price retraces after a momentum impulse where that retracement soon becomes something more than just counter trend behavior. So, when price sells off (like it did on a large scale in the fall of '08, and as it did in January of this year) you expect some form of profit taking by those that are short, usually in the 38% retracement level. If stops are close enough overhead (say at the 40% level) they get taken out and price starts to work higher. The higher prices begin to drift as a result of short covering, the faster things begin to move counter to the selloff, much like it did in that chart from September '09.
So, here we are, two markets (SPY & DIA) having retraced over 50% of their Oct.'08 momentum selloff, and another two markets (Q's & IWM) having retraced over 62% off those March lows. While the Russell certainly looked impressive this week, the Nasdaq is one of those charts where I'm left thinking, "could this thing go all the way!?" After all, it is a mere 15% off of it's 11/07 highs! And it doesn't seem to me like the "retail crowd" has been fully participating in this market for quite some time, so what happens if they start jumping aboard in fear of missing out? They are the last to arrive after all.
On all the charts below I have marked the following; (1) the gap range left from Sept. '08. (2) A Fibonacci Retracement, beginning at the swing high of '07 and down to the swing low of March '09. (3) A Fibonacci 3-point Price Extension (beginning at the March '09 lows, to the top of the first impulse move and projected off of that flags' low, where the next impulse move began.
While the Q's look very impressive, the other broad markets still have a lot to prove. The IWM, for instance, has an overhead gap above at the $70 level, but having made it through $65 seems as though it may want to spend some time back in this early 2008 consolidation level.
While the laggard DIA, and to a lesser extent the SPY have some hurdles to overcome.
The DIA at around $112 has the 61.8% retracement and a gap, with previous support directly above (Support becomes Resistance). Similar setup on SPY. The faster price makes a move for the $120 level, the more climactic things will become, and remember the adage; Trends always end in a climax.

Here's where it get's interesting

So, provided Friday was the "bottom" of the most recent correction, here's where the S&P500 Index stands on a weekly basis since March of '09:Price has put in a higher low and sold off around 6.3%. Fairly average in the context of the '09-'10 rally.
Off of Friday's low, price has recovered nearly 40% in two days. Directly overhead is a key level of potential resistance wedged right between the 50% - 61.8% retracement zone, the convergence of the 20- & 50EMA's (Yellow and Red line) and for argument's sake of which is better, the Exponential Moving Average, or the Simple Moving Average, I've included both (20- & 50-SMA are in Green and Blue).However, we have seen this before....there was July '09, when price blew right through this confluence.
Everyone seems to be anticipating January 19th as being the "top," but there's a fine line between retracement off of a momentum move and a (yet another) run-the-stops short squeeze up to fresh highs. It shouldn't be long before we find out which it will be.

Fib resistance/support

The 78.6% retracement strikes again!
The SPY met with resistance on the gap up this morning (as measured between the most recent swing high to low). Momentum registered higher on a lower price swing (Slingshot setup), but we didn't get much movement today.AIG sold off this morning from the $29.50 level. Funny thing is, it closed right on top of the 78.6% retracement level (as measured between the previous impulse swing move and the highs at the bounce). Also, price barely measured a negative momentum reading (bullish divergence). We could very well see a snap-back in price, or perhaps a buyable gap down if that's the case in the morning.

steep retracements

The 78.6% Fib. retracement held as SPY support today. The chart below measures the distance between the most recent swing low (the "Dubai gap") and swing high (tested on 12/04). This level also happened to be a confluence level from a 100% Fib. Extension (measured from the 12/04 high and corrective move low and projected off of the following corrective move highs). On top of it all, today's test of the lows happened on a momentum divergence.
Just another bounce on range-bound support. The last three times we bounced from this level we put in a new high on the very next day! Tomorrow should give us a reasonable clue to determine the "pace" of buying interest.Here's another look at the 78.6% retracement level from this morning in the SPY on a fast time frame. As measured between their most recent swing highs to lows in the opening hour:And then, when price was testing the lows of the day price made two steep retracements and turned around on strong volume (not shown):
SPY with Up/Down Volume today: