Stock Apocalypse Now - Updated Technical View

Since our 2012 technical forecast was issued earlier this year, S&P prices have closed right at key resistance of 1292. Apart from the further maturation of the current rally, not much else has changed.

Figure 1 below divides intermediate Elliot Waves into sub-waves in order to illustrate further the maturity of the current rally:

• Intermediate Wave 1 down, shown with black dotted line, consisted of five sub-waves (i) through (v), each of which is depicted with a red dotted line


• Note that sub-wave (iii) down was the largest in magnitude


• Countertrend rallies consist of three-wave movements, in this case shown
  as A through C, and depicted with blue dotted lines


• Sub-wave C can be further subdivided into 5 smaller waves (not shown)

It would appear that the S&P is completing the fifth of five sub-waves within wave C of intermediate Wave 2. Note that daily stochastics are overbought at 94% and that S&P prices closed right at key resistance of 1292.

Once this move is complete, Intermediate Wave 3 down should begin. According to Elliot Wave theory, the magnitude of this wave will exceed that of Wave 1 down, which featured a 300 point drop.

I believe investors should consider taking trading profits from this recent rally to avoid the coming “stock-apocalypse.”

This article should interest investors in SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY), PowerShares QQQ Trust (Nasdaq: QQQ), PowerShares Short Dow 30 (NYSE: DOG), ProShares Ultra Short QQQ (NYSE: QLD), ProShares UltraShort S&P 500 (NYSE: SDS), iShares Russell 2000 (NYSE: IWM).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

The Coming Stock Apocalypse

Doomsday, Dec 21st 2012, may be almost a year away according to the Mayan calendar, but catastrophic downside for stock market indices is likely more imminent. Even in this Presidential election year, a return to March 2009 Bear Market lows is a definite possibility. Perhaps the only question is... when?

A Technical View

Against a backdrop of slowing growth and looming debt crises, both in the U.S. and abroad, stock valuations appear to be suspect:

• Based on current forecasts, U.S. debt will likely eclipse GDP in 2012 even as economic growth slows in the United States. Monetary and fiscal policies are unlikely to be supportive in the current environment;


• Bloomberg reports that over $200B in European debt will come due in the first quarter of 2012 and that the Euro Zone will likely enter recession;


• Morgan Stanley has recently revised growth forecasts in emerging markets downward from 6.1% to 5.7%. Even that growth prediction is contingent upon supportive policy decisions from the U.S. and Europe.

Technical analysis also suggests that downside will resume early in 2012. Elliot Wave Theory identifies the current S&P 500 price pattern as the onset of intermediate Wave 3 down (see Figure 1 below). By definition, Wave 3 down includes the largest price move in a five-wave pattern. This would imply a downside target of roughly 950 or less for this wave movement alone.



From the chart in Figure 1, constructed at author's submission of article on January 1st, we can also observe the following:

• Key resistance for the S&P is at the October high of 1292 with key support at the December 20th low of 1242;


• The 50 day moving average remains below the 200 day moving average; note that this is the so-called “death-cross,” which some treat as the defining indicator for bear market conditions;


• Index closing prices are still hovering near the benchmark 200-day moving average;


• Daily Stochastics show that the S&P 500 is currently overbought as a result of the recent but muted “Santa Clause” rally;


• Current price formation is that of a rising bearish wedge.

Any further upside rally in early 2012 should be contained in both price and duration. If prices fall below 1242 without reaching fresh highs, wave 3 down has already begun. Instead, a definitive break above resistance at 1292 would suggest an alternate wave count and could ultimately lead prices as high as 1350 before wave 3 down begins.

Should the rally continue, this final upward move may also foster conditions for a second, confirming “Hindenburg Omen.” The first instance of the indicator was observed on December 19th 2011. A second observation within a month would provide very reliable foreboding.

In any case, Greek readers should consider taking trading profits from this recent rally to avoid the coming "stock-apocalypse."

Disclosure: I have no position currently, however, I intend to sell (short) S&P futures at 1275.50 or higher.

Article should interest investors in SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY), PowerShares QQQ Trust (Nasdaq: QQQ), ProShares Short Dow 30 (NYSE: DOG), ProShares Ultra Short S&P 500 (NYSE: SDS), ProShares Ultra QQQ (NYSE: QLD), NYSE Euronext (NYSE: NYX), The NASDAQ OMX Group (Nasdaq: NDAQ), Intercontinental Exchange (NYSE: ICE), E*Trade Financial (Nasdaq: ETFC), Charles Schwab (Nasdaq: SCHW), Asset Acceptance Capital (Nasdaq: AACC), Affiliated Managers (NYSE: AMG), Ameriprise Financial (NYSE: AMP), TD Ameritrade (Nasdaq: AMTD), BGC Partners (Nasdaq: BGCP), Bank of New York Mellon (NYSE: BK), BlackRock (NYSE: BLK), CIT Group (NYSE: CIT), Calamos Asset Management (Nasdaq: CLMS), CME Group (NYSE: CME), Cohn & Steers (NYSE: CNS), Cowen Group (Nasdaq: COWN), Diamond Hill Investment (Nasdaq: DHIL), Dollar Financial (Nasdaq: DLLR), Duff & Phelps (Nasdaq: DUF), Encore Capital (Nasdaq: ECPG), Edelman Financial (Nasdaq: EF), Equifax (NYSE: EFX), Epoch (Nasdaq: EPHC), Evercore Partners (NYSE: EVR), EXCorp. (Nasdaq: EZPW), FBR Capital Markets (Nasdaq: FBCM), First Cash Financial (Nasdaq: FCFS), Federated Investors (NYSE: FII), First Marblehead (NYSE: FMD), Fidelity National Financial (NYSE: FNF), Financial Engines (Nasdaq: FNGN), FXCM (Nasdaq: FXCM), Gamco Investors (NYSE: GBL), GAIN Capital (Nasdaq: GCAP), Green Dot (Nasdaq: GDOT), GFI Group (Nasdaq: GFIG), Greenhill (NYSE: GHL), Gleacher (Nasdaq: GLCH), Goldman Sachs (NYSE: GS), Interactive Brokers (Nasdaq: IBKR), INTL FCStone (Nasdaq: INTL), Intersections (Nasdaq: INTX), Investment Technology (NYSE: ITG), Invesco (NYSE: IVZ), Jefferies (NYSE: JEF), JMP Group (NYSE: JMP), Janus Capital (NYSE: JNS), KBW (NYSE: KBW), Knight Capital (NYSE: KCG), Lazard (NYSE: LAZ), Legg Mason (NYSE: LM), LPL Investment (Nasdaq: LPLA), Ladenburg Thalmann (AMEX: LTS), Mastercard (NYSE: MA), Moody’s (NYSE: MCO), MF Global (NYSE: MF), Moneygram (NYSE: MGI), MarketAxess (Nasdaq: MKTX), Marlin Business Services (Nasdaq: MRLN), Morgan Stanley (NYSE: MS), MSCI (Nasdaq: MSCI), MGIC Investment (NYSE: MTG), NewStar Financial (Nasdaq: NEWS), National Financial Partners (NYSE: NFP), Nelnet (NYSE: NNI), Northern Trust (Nasdaq: NTRS), NetSpend (Nasdaq: NTSP), Ocwen Financial (NYSE: OCN), Oppenheimer (NYSE: OPY), optionsXpress (Nasdaq: OXPS), PICO (Nasdaq: PICO), Piper Jaffray (NYSE: PJC), PMI Group (NYSE: PMI), Penson Worldwide (Nasdaq: PNSN), Portfolio Recovery (Nasdaq: PRAA), Raymond James (NYSE: RJF), SEI Investments (Nasdaq: SEIC), Stifel Financial (NYSE: SF), Safeguard Scientifics (NYSE: SFE), State Street (NYSE: STT), SWS (NYSE: SWS), T. Rowe Price (Nasdaq: TROW), Visa (NYSE: V) and Virtus Investment Partners (Nasdaq: VRTS).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

All Hell Breaking Loose?

Since our last technical analysis installment, the S&P has fallen below the April 18th low of $1294.70 and has remained below that level for nearly the entire month of June. As predicted, index prices have also since fallen 3% to a short term low around 1258 and presently sit just above another key support: the March 16th low of 1249 (see "A" in Figure 1). Should that level fail, indeed "all hell may break loose"!

All Hell Breaking Loose?

The tension in the current price movements is accentuated by several converging lines of support and resistance:

• Resistance: the April low of 1294;
• Support: the March low of 1250;
• Resistance: 20 day moving average at 1287;
• Support 200 day moving average at 1264;
• Resistance: the falling trend-line that has acted as resistance to any rally -- see grey dotted line labeled with “B” above

Of particular note is the current price relative to the 200 day moving average. A decisive drop below this level would likely prompt institutional selling.

In any case, index prices are definitely poised for a big move in either direction. With austerity measures in Greece hanging on a single-vote; with the possibility of pre-earnings announcements looming any day; and with seasonal weakness likely through the end of June, short-term capitulation to 1233-1240 would seem a precursor to any significant Fourth-of-July rally. Let the sparks fly!



Article should interest investors in Bank of America (NYSE: BAC), J.P. Morgan Chase (NYSE: JPM), Goldman Sachs (NYSE: GS), Citigroup (NYSE: C), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), TD Bank (NYSE: TD), PNC Bank (NYSE: PNC), State Street (NYSE: STT), Janus (NYSE: JNS), T. Rowe Price (Nasdaq: TROW), General Electric (NYSE: GE), Wal-Mart (NYSE: WMT), McDonald's (NYSE: MCD), Alcoa (NYSE: AA), American Express (NYSE: AXP), Boeing (NYSE: BA), Caterpillar (NYSE: CAT), Cisco Systems (Nasdaq: CSCO), Chevron (NYSE: CVX), DuPont (NYSE: DD), Walt Disney (NYSE: DIS), Home Depot (NYSE: HD), Hewlett-Packard (NYSE: HPQ), IBM (NYSE: IBM), Intel (Nasdaq: INTC), Johnson & Johnson (NYSE: JNJ), Kraft (NYSE: KFT), Coca-Cola (NYSE: KO), 3M (NYSE: MMM), Merck (NYSE: MRK), Microsoft (Nasdaq: MSFT), Pfizer (NYSE: PFE), Procter & Gamble (NYSE: PG), AT&T (NYSE: T), Travelers (NYSE: TRV), United Technologies (NYSE: UTX), Verizon (NYSE: VZ), Exxon Mobil (NYSE: XOM), Paychex (Nasdaq: PAYX), Manpower (NYSE: MAN), Robert Half International (NYSE: RHI), 51Job Inc. (Nasdaq: JOBS), Monster World Wide (NYSE: MWW), Korn/Ferry International (NYSE: KFY), Administaff (NYSE: ASF), Kforce (Nasdaq: KFRC), TrueBlue (NYSE: TBI), Dice Holdings (NYSE: DHX), Kelly Services (Nasdaq: KELYA), SFN Group (NYSE: SFN), CDI Corp. (NYSE: CDI), Cross Country Healthcare (Nasdaq: CCRN), On Assignment (Nasdaq: ASGN), AMN Healthcare Services (NYSE: AHS), Barrett Business Services (Nasdaq: BBSI), Hudson Highland Group (Nasdaq: HHGP), StarTek (NYSE: SRT), RCM Technologies (Nasdaq: RCMT), VirtualScopics (Nasdaq: VSCP), General Employment Enterprises (NYSE: JOB) and TeamStaff (Nasdaq: TSTF).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Smoke and Mirrors

In his latest report, Wall Street Greek Technical Analyst Steven Ferguson discusses the ongoing relevance of technical analysis, despite recent market defiance of technical metrics. Ferguson speaks of interference by an invisible hand at critical junctures, but suggests investors ignore smoke and mirrors and stay attuned to the trend-line.

Relative tickers: NYSE: DIA, NYSE: SPY, Nasdaq: QQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, Nasdaq: NDAQ, NYSE: ICE, Nasdaq: ETFC, Nasdaq: SCHW, Nasdaq: AACC, NYSE: AMG, NYSE: AMP, Nasdaq: AMTD, Nasdaq: BGCP, NYSE: BK, NYSE: BLK, NYSE: CIT, Nasdaq: CLMS, NYSE: CME, NYSE: CNS, Nasdaq: COWN, Nasdaq: DHIL, Nasdaq: DLLR, Nasdaq: DUF, Nasdaq: ECPG, Nasdaq: EF, NYSE: EFX, Nasdaq: EPHC, NYSE: EVR, Nasdaq: EZPW, Nasdaq: FBCM, Nasdaq: FCFS, NYSE: FII, NYSE: FMD, NYSE: FNF, Nasdaq: FNGN, Nasdaq: FXCM, NYSE: GBL, Nasdaq: GCAP, Nasdaq: GDOT, Nasdaq: GFIG, NYSE: GHL, Nasdaq: GLCH, NYSE: GS, Nasdaq: IBKR, Nasdaq: INTL, Nasdaq: INTX, NYSE: ITG, NYSE: IVZ, NYSE: JEF, NYSE: JMP, NYSE: JNS, NYSE: KBW, NYSE: KCG, NYSE: LAZ, NYSE: LM, Nasdaq: LPLA, AMEX: LTS, NYSE: MA, NYSE: MCO, NYSE: MF, NYSE: MGI, Nasdaq: MKTX, Nasdaq: MRLN, NYSE: MS, Nasdaq: MSCI, NYSE: MTG, Nasdaq: NEWS, NYSE: NFP, NYSE: NNI, Nasdaq: NTRS, Nasdaq: NTSP, NYSE: OCN, NYSE: OPY, Nasdaq: OXPS, Nasdaq: PICO, NYSE: PJC, NYSE: PMI, Nasdaq: PNSN, Nasdaq: PRAA, NYSE: RJF, Nasdaq: SEIC, NYSE: SF, NYSE: SFE, NYSE: STT, NYSE: SWS, Nasdaq: TROW, NYSE: V and Nasdaq: VRTS.

Smoke and Mirrors

Once again, market indices sit at a critical juncture. Since July 2010 and until last week, prices have traded within the trend channel similar to the one depicted in Figure 1 below. As annotated by the arrow labeled "A," the S&P closing price has recently dropped outside that channel, has since retested the lower boundary, and presently remains slightly below that level at $1300.61.

Furthermore, Friday’s close lies tenuously above the April 18th low of $1294.70 annotated by arrow "B" in the chart. A decisive break below $1294 would likely lead to a further correction of 3-5% in the near term and could very possibly signify that the often-anticipated top to the bear market rally occurred with the May peak and is already in place.



However, each time indices have reached such a level, it seems a not-so Invisible Hand has intervened to support asset prices and (ostensibly) prevent illiquidity. Often such intervention occurs during a Globex trading session, very often on a Sunday night when trading volume can be especially thin. Despite foreboding technical indicators, the market somehow defies gravity and resumes its multi-year rally against the backdrop of a carefully-orchestrated economic mirage.

Thus technical analysis, particularly analysis that has been founded on Elliot Wave, seems to be confounded by unnatural market forces, surreptitious intervention and even high frequency trading algorithms. This would seem to be a plausible outcome since the existence of wave patterns identified by Elliot Wave theory is predicated upon predominant action and reaction of human participants in the context of a free market.

However, EW’s Prechter and others insist (for example) that, because computers are programmed by humans based on their own understanding of market action, Elliot Wave patterns can still accurately capture and anticipate market price movements. And since the FED is like any other market respondent, it cannot hope to offset the eventual behavior of market masses through its policy decisions and monetary countermeasures. Nevertheless, EW practitioners have been forced to interpret rules in more obscure ways in order to accommodate these increasingly invasive and unnatural market forces.

So where does that leave technical analysis in general and Elliot Wave in particular? Should we abandon it? Should we ignore the signposts that it often provides?

The answer is a resounding "No!" Instead, we may confidently continue to use technical analysis as a basis for shorter-term trading and as a tool to optimize the timing of longer-term investment decisions.

In particular:

• Technical analysis can be used to identify high probability outcomes in various time frames. The prediction of these outcomes does not eliminate the likelihood that lower probability outcomes will occur. The key is to identify the important price levels and respond appropriately when those levels are achieved or violated. In the present case, the author has a modest short position in June S&P futures with the expectation that prices could break key support of 1290. A decisive rise above 1306 would lead me to cover my short position.


• Technical analysis seems more effective as a basis for short-term trading and for localized timing of longer-term investment decisions. A review of recent articles in this column would reveal that, although we may not have been able to identify the market top, each prediction has correctly warned of a significant price move. Furthermore, as we approach our third significant market top in a little over a decade, it would seem that such market timing is increasingly important. Particularly in the age of high-frequency trading promulgated largely by the investment banks, buy-and-hold may no longer provide a viable investment strategy. This increases the importance in awareness and interpretation of key technical indicators.


• The principles that underlie Elliot Wave theory remain valid, particularly the emphasis on analytical understanding of crowd behavior. While identification of specific wave patterns can be problematic, Elliot Wave also emphasizes the measurement of market sentiment with the basic notion that extreme values foretell reversal. Such has been the case recently with precious metals, especially silver. With so many traders and retail investors scrambling to speculate on the price of silver, a significant drop was imminent. The recent drop in silver likely signifies just the beginning of the correction in the commodities bubble as a whole.


• Economic fundamentals remain an important back drop to technical analysis. Through his own cogent evaluation of economic indicators, the Greek has often exposed the fallacy in popular views of economic growth. Even though the FED may continue to intervene with QE3, QE4 …QEx, and the US Government (indeed all governments worldwide) may continue to raise debt ceilings in their vain efforts to preserve public spending through taxpayer indebtedness, it is painfully obvious that these measures have largely failed to solve basic problems in housing, credit and unemployment.

Therefore, this is no time for complacency, even in long-term investments! The author urges readers to remain alert for signs of technical weakness. The Greek will continue to provide an important source of early warning for our readership.



Article should interest investors in SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY), PowerShares QQQ Trust (Nasdaq: QQQ), ProShares Short Dow 30 (NYSE: DOG), ProShares Ultra Short S&P 500 (NYSE: SDS), ProShares Ultra QQQ (NYSE: QLD), NYSE Euronext (NYSE: NYX), The NASDAQ OMX Group (Nasdaq: NDAQ), Intercontinental Exchange (NYSE: ICE), E*Trade Financial (Nasdaq: ETFC), Charles Schwab (Nasdaq: SCHW), Asset Acceptance Capital (Nasdaq: AACC), Affiliated Managers (NYSE: AMG), Ameriprise Financial (NYSE: AMP), TD Ameritrade (Nasdaq: AMTD), BGC Partners (Nasdaq: BGCP), Bank of New York Mellon (NYSE: BK), BlackRock (NYSE: BLK), CIT Group (NYSE: CIT), Calamos Asset Management (Nasdaq: CLMS), CME Group (NYSE: CME), Cohn & Steers (NYSE: CNS), Cowen Group (Nasdaq: COWN), Diamond Hill Investment (Nasdaq: DHIL), Dollar Financial (Nasdaq: DLLR), Duff & Phelps (Nasdaq: DUF), Encore Capital (Nasdaq: ECPG), Edelman Financial (Nasdaq: EF), Equifax (NYSE: EFX), Epoch (Nasdaq: EPHC), Evercore Partners (NYSE: EVR), EXCorp. (Nasdaq: EZPW), FBR Capital Markets (Nasdaq: FBCM), First Cash Financial (Nasdaq: FCFS), Federated Investors (NYSE: FII), First Marblehead (NYSE: FMD), Fidelity National Financial (NYSE: FNF), Financial Engines (Nasdaq: FNGN), FXCM (Nasdaq: FXCM), Gamco Investors (NYSE: GBL), GAIN Capital (Nasdaq: GCAP), Green Dot (Nasdaq: GDOT), GFI Group (Nasdaq: GFIG), Greenhill (NYSE: GHL), Gleacher (Nasdaq: GLCH), Goldman Sachs (NYSE: GS), Interactive Brokers (Nasdaq: IBKR), INTL FCStone (Nasdaq: INTL), Intersections (Nasdaq: INTX), Investment Technology (NYSE: ITG), Invesco (NYSE: IVZ), Jefferies (NYSE: JEF), JMP Group (NYSE: JMP), Janus Capital (NYSE: JNS), KBW (NYSE: KBW), Knight Capital (NYSE: KCG), Lazard (NYSE: LAZ), Legg Mason (NYSE: LM), LPL Investment (Nasdaq: LPLA), Ladenburg Thalmann (AMEX: LTS), Mastercard (NYSE: MA), Moody’s (NYSE: MCO), MF Global (NYSE: MF), Moneygram (NYSE: MGI), MarketAxess (Nasdaq: MKTX), Marlin Business Services (Nasdaq: MRLN), Morgan Stanley (NYSE: MS), MSCI (Nasdaq: MSCI), MGIC Investment (NYSE: MTG), NewStar Financial (Nasdaq: NEWS), National Financial Partners (NYSE: NFP), Nelnet (NYSE: NNI), Northern Trust (Nasdaq: NTRS), NetSpend (Nasdaq: NTSP), Ocwen Financial (NYSE: OCN), Oppenheimer (NYSE: OPY), optionsXpress (Nasdaq: OXPS), PICO (Nasdaq: PICO), Piper Jaffray (NYSE: PJC), PMI Group (NYSE: PMI), Penson Worldwide (Nasdaq: PNSN), Portfolio Recovery (Nasdaq: PRAA), Raymond James (NYSE: RJF), SEI Investments (Nasdaq: SEIC), Stifel Financial (NYSE: SF), Safeguard Scientifics (NYSE: SFE), State Street (NYSE: STT), SWS (NYSE: SWS), T. Rowe Price (Nasdaq: TROW), Visa (NYSE: V) and Virtus Investment Partners (Nasdaq: VRTS).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.