04-23-2012 the week ahead

I told you last week to expect a sideways week with a slight upside bias.  Even though there was a lot of movement at the end of the week that is what we got.

It appears the short cyle (1/8 the Wall cycle 12-13 days) topped and turned down.  The 1/4 Wall cycle remains up.  The Half Wall and Wall cycle are down.  Also the Kitchin cycle should be entering a hard down phase.

Over all it appears we should have a down week, and I suspect we may test recent lows and potentially head lower after that.

Here is a visual:

GL traders.  I will probably not be posting for a few weeks.  The market should be in correction mode the next 4-5 months.  There will be bounces, so be careful.

04-17-2010 observations

Th downturn is now taking a break as the shorter 1/4 Wall cycle has turned up.  This will probably last a week or a bit more.  The 1/2 wall cycle is down, the wall cycle is down but these will take a few days to build downside momentum.  Could we set a new S&P high?  Maybe, but I am doubtful this will happen as the Kitchin Cycle should be entering a "hard down" phase.  Overall - it appears we trend sideways with a slight upside bias near term (next week or so).

Here is a visual:

GL traders. 

Probably 1 more post before I enter the hospital  for needed surgery after which I expect to be offline for at least 3-4 weeks as I recover.  The next few weeks (and months) could get very interesting as we get a preview of the upcoming bottom in 2013-2014 as several major cycles bottom by 2014. The Kitchin cycle bottoming by mid-September or early October this year gives you that preview.

04-15-2012 Going forward

I have encountered some health issues (not insignificant) and may at times be unable to post relevant information in a timely manner over the next few months.  I am hopeful I can overcome my health issues over the next few months.  I appreciate ll your support  the past 1.5 years and  wish you the best of luck in your trading.  Your best wishes and prayers are GREATLY appreciated.  Inlet

04-09-2012 observations

If you looked close at the last set of charts posted you say that as of the end of March (First of April) both the 20 week Wall cycle and 10 week (1/2) Wall were down.  This was enough to cause this past week to be down.  This combination continues this week and expectations are we get a second down week, 

The downside objective is around 1345 (1340-1350) for the week.  The downside for April is lower as the 20 week Wall cycle does not bottom until late April (early May).  Also keep in mind the Kitchin Cycle should start adding some serious downside by mid April.  So a downside of 1300 or lower would not surprise by the end of the month,

We could talk about no new QE by the FED, Spain, or the employment #s - but then the talking heads on CNBC would have nothing to talk about....  Here is a zoomed in chart of the S&P:

GL traders.  Sold 1/5 of my RWM that I bought about a week ago for about a 2% profit.  Starting to get my cost on RWM down closer to current prices.  

04-01-2012 April and beyond - observations

We know Nenner is calling for a top in the 1440s by mid April.  How does that mesh with our analysis?  Recently we have focused primary on the Kitchin cycle and its component cycles.

The Kitchin is 42-54 months in length.  For convenience we have used 42 months in our discussion (measured bottom to bottom).  The up leg of the Kitchin tends to be longer than the down phase.  Of the 42 months the up phase will normally take 2 1/2 years (30 months) and the down phase 12 months (or more).  So the cycle is not perfectly symmetrical as depicted on my charts.

The Kitchen cycle is actually a business cycle (sometimes called the inventory cycle) that we apply to stock analysis.   The Kitchin cycle is often mistakenly called the 4 year cycle.  The Kitchin cycle is composed of shorter cycles.  One  third of it as a sub-division (14 months  or around 300 trading days).  Each third of a Kitchin cycle is made up of 3 Wall cycles (about 4.5 months or 100 trading days).  Each third Wall cycle tends to be the weakest in a group of 3 - that is the Wall that is within the downside of the 1/3 of a wall cycle so we see the impact of the 1/3 sub Kitchin cycle.  So within the Kitchin cycle the 3rd, 6th and 9th Wall cycles will be the weakest.

The reason to emphasize the Kitchin cycle is we are now 3 years plus into it and should be entering the are of maximum downside pressure (the last 1/8  or 6 months of the cycle).  Earliest bottom date could be 2nd week of September.  If the cycle runs long it could be later in 2012 or early in 2013 before it bottoms.  Given the expiration of Bush tax cuts, the payroll tax deduction, and the sequestering of funds starting in Jan 2013 it may run long.

Here is an ideal representation of the Kitchin cycle from the bottom in Mar 2009:

As you can see from the chart we should be in the "hard down" phase of the Kitchin cycle starting by mud-April.  This aligns with Nenner's prediction of a top by then.....  So I expect we could see a significant top in April.
Focusing in and looking at the 1/3 Kitchin cycle we see that we are in the 8th (of 9) Wall cycles within the Kitchin cycle.  Each Wall cycle is about 4 1/2 months so the current (8th) wall cycle should bottom in late April.  Then we go into the 9th Wall cycle (3rd in a group of 3) which tends to be weak.  This is rational as the Kitchin cycle should be moving hard down.  4 1/2 months from late April puts you into the mid September time frame where we will start looking for a bottom.  As mentioned above - there are tax ramifications Jan 2013 which could extend the down leg of the Kitchin cycle (42-54 months and we are using 42).  Note: Many refer to this as the 4 year or presidential election cycle.

Take a close up look at the Kitchin third and Wall cycles:

In summary  - we have the Kitchin ready to enter a hard down phase.  We have the 3rd of 3 (9th) Wall cycle on deck and normally this would be a weak cycle.  So April (as Nenner predicts) could be a pivotal month for a change in trend.

Gl traders

03-30-2012 Martin Armstrong

There are few if any experts thought more highly of than Martin Armstrong.  Here are recent thoughts from him:

http://www.safehaven.com/article/24880/martin-armstrong-on-the-sovereign-debt-crisis

GL readers

03-30-2012 Charles Nenner speaking out

Been a while (several months) since I have seen anything from Nenner.  Now there are multiple articles in March.  His view seems to be the stock market tops by mid-April  and heads down.  I cannot argue with that and have talked about the 42 month Kitchen cycle which bottomed in March 2009 and should bottom around mid Sept 2012.  With longer cycles you tend to get the most downside in about the last 1/8th of the cycle  (1/8 x 42 = 5.25 months.  October less 5 months is April, or time to head south).

Nenner also says he got out of gold last year around $1900, but it is now time to buy gold (and silver) with a target of $2500 on gold ($50+ on silver).  But instead of me telling you - read for yourself - here are the links:

http://www.businessinsider.com/gold-2500-2012-3

http://www.forbes.com/sites/johnnavin/2012/03/25/an-interview-with-technical-analyst-charles-nenner/?feed=rss_home

http://finance.yahoo.com/blogs/breakout/market-rally-peak-next-month-charles-nenner-150005109.html

Gl traders

03-25-2012 observations

We said last week we expected the market to flatten and then turn down.  I would say that is close to what happened.   This week we expect the market to grudgingly give some ground.  Since it is end of month and end of quarter we may see some portfolio adjustments.  A fund that has seen APPL (IBM) exceed 5 % of the portfolio because of its rise may have to trim back under 5% (if they limit any one position to 5%).  So we could see some weakness in high fliers if this happens.  Not sure to what extent this could be an issue, but if high fliers give ground then the market as a whole will give ground.  Just something to keep in mind.

Longer term is operation "Twist".  QE1 and QE2 both boosted equities in the spring of 2010 and 2011.  TWIST seems to be doing the same this year as the FED sells short term bonds and buys longer term bonds as it attempts to suppress longer term rates.  This has been working, but 10 year rates have started to move up, so maybe the FED is out of ammo.  Seems they are running out of short term bonds to sell.    I suspect we may see a repeat of a sell off as the FED operation "Twist" comes to an end same as we did at the end of QE1 and QE2.  And "Twist" may be coming to an end sooner than expected - which could lead to a market downturn as early as April/May  (there is some indication of that in the cycles). 

Here is the SPX:

 GL traders, have a profitable week.

03-21-2012 Charts from Victor

Hi Inlet,

So I have an 80/40/20/10 day cycle chart here and it seems to be in line up to a year back.  I guess my question is how valid is this?  I noticed that you used to reference it but have switched to a Wall Cycle and it now lines up differently because the periods are different lengths

tx,

v
 Note: Victor - I inverted colors on your charts to try and make them a bit more readable....  Here are the charts:

Second chart:

Victor - BTW - nice job on the charts.  To try and answer your question - I have no license that says my interpretation will always be correct.  Your interpretation may be the correct one.    I am just glad you are taking the time and interest to do you own analysis.  I try and find the interpretation that bests fits the data.  I may or may not find that best fit. 

Your 80 day length closely tracks T-Theory  (see blogs I follow - Terry Laundry - he uses 16 weeks and 5 x 16 = 80). 

Appreciate your input.

Update: For clarity here is Victor's Chart  #1 reproduced on StockCharts.  Any errors are strictly mine:

03-21-2012 observations

Not much of a change from last post.  I had speculated a 1410 high (we got 1412+ I believe).  I also speculated we would get a flattening out (with today's pullback that may be happening).  After that we should see a bit of a pullback (under 1400 - maybe 1375).  Not the time for a huge pullback yet - got to get all the sheep rounded up for the shearing first?

Here is an updated picture:

GL traders  

03-16-2012 observations

We broke above 1400 target.  Seems though the market is losing upside momentum.  The DOW has been up 7 (or is it 8) days in a row and runs like this are rare and overdue a rest.  I suspect we could see 1408-1410 as a top.

In looking at the charts is see once we reach this juncture of cycles though the market tends to go flat for 4-5 days.  Here is the SPX showing this:

GL traders

03-14-2012 outlook

A week ago I told you I believed the Qtr Wall cycle had bottomed and we would see a drift up for about 2 weeks.  The move up was much sharper than I thought and reached levels higher than I anticipated in such a short period.  It now looks as if we may be reaching a top looking at the 25TD DPO (1400?).  Tomorrow should give us a clearer picture.  It could go somewhat higher as it is still 3-5 TDs to the time that the qtr Wall should top.

Here is the outlook:

GL traders.  May buy more RWM if it breaks below $26.

03-09-2012 Slow Sto

According to Robert McHugh if the Slow Sto stays above 20 for 2.5 months a sell off normally occurs (+/- 2 weeks). Here is the Slow STO:

Bought back RWM I sold on Tuesday.  GL traders.

03-07-2012 outlook

Looked at some of the stock market blogs.  Seems several are talking about a substantial sell off (1200, 1100, 1000, and lower.  Now maybe they will be right (eventually), but it appears to me we set a bottom for the quarter Wall cycle (25TDs) yesterday.  We now have a substantial gap down that makes a target to be filled as the Quarter Wall cycle turns up.  So maybe we get the sell off many are calling for, but it is not going to be straight down.  I think we take the next 12 or so TDs repairing the damage from yesterday before we continue down (turn around Mar 19-20).

Here is an updated chart for SPX:

Given this outlook I cashed in 1/2 my RWM position yesterday for a 2+% profit.  I will look to buy more RWM down near $27.  GL traders.

03-06-2012 Cycles and Elliot Waves

Elliot Waves are a methodology of tracking cycles.  I find it tedious with lots of rules and exceptions.  But here Elliot Wave in theory as applied to the growth (inventory or Kitchin cycle and its sub cycles):

OK, that is the theory.  May not be a perfect fractal as I interpret the Kitchin being divided into 9 Wall cycles.  Still I check EW sites from time to time to verify my analysis.  I am not an EW analyst, but here is the latest EW counts according to my understanding:

Hope - this enlightens.  I feel cycles and Elliot Waves are two different approaches to extract the same information.  I believe cycles are the simpler approach.

GL traders

03-02-2012 recession ahead

I have noticed that recessions generally start when the economic numbers are  at highs.  Many people tend to project today's numbers into the future - which is why they are surprised when the economy takes a tumble.  ECRI predicted a recession by the second quarter of 2012 back at the end of September.  They have an excellent record in calling recessions.  Now I could show you a lot of charts that claim to predict the future. 

Instead I am going to show you one chart.  It is not some prediction but shows the "data" (not some prediction) and is referred to a coincident indicator.  It is on the verge of falling into an area that normally precedes or coincides a recession.  Here is the chart:

You decide, recession or not.    

03-02-2012 outlook

I believe the 20 week Wall cycle has topped.  We could set a marginal new high today, but I believe the odds do not favor that outcome.  That does not mean we immediately fall 100 points on the S&P.  Why?  Because the shorter qtr Wall (about 25TDs is now up as it just bottomed) and that will give us dueling cycles.  I have tried to determine the likely result of this.  Using DPOs for the Wall cycle (about 210 points and the qtr wall cycle (56 points) it appears they should almost precisely offset over the next 12 or so TDs. 

As a result of this dominant cycle pushing down as another pushes up it would imply an increase in volatility.  So there may be increased short term trading opportunities.  Be careful and preserve your capital. 

Here is the SPX and the outlook:

GL traders.  Let's make some money.   

Mar 2012 outlook

It appears the longer 20 week Wall cycle should top Mar 1.  At the same time you have shorter cycles that have just bottomed .  So we start the month with offsetting cycles.  It will take a week or more for the 20 week Wall cycle to build down side momentum.  I suspect we continue sideways at least thru the first full week of March.  We will have to see if the 20 week Wall cycle has enough strenth to give us a bit of down side.  By mid-March we get cycles sychronized to the downside  (Ides of March).

Here is how I see the SPX going into March:

Gl.  More of the same?

March 2012 spiral dates

http://spiraldates.com/2012/charts/scores_0312.png

02-27-2012 week ahead

This year so far reminds one of the start of 2011 when QE2 and excess liquidity by the FED was supporting stock prices.  The Fed claims there is no QE3, yet through interbank loans with the ECB they are supporting QE1 by the ECB - so we are seeing similar stock reaction.  So it seems to me there is QE3 by proxy by the ECB.  And this week we get additional QE (LTRO) from the ECB.  As with the FED (QE2 was less effective than QE1) one would expect ECB QE2  to be less effective than ECB QE1.  QE is the symptom of a problem, not a solution. 

Lat week we saw a new high on Monday (SPX) and then again on Friday.  I speculated Monday may be a high but lacked confidence (felt it may be later in the week or early this week).  With all the ECB liquidity flooding the world it supports higher equity prices so any pullback at this time is apt to be limited.  Still the market is over due a correction and it appears tops are in.  Here is the SPX:

GL traders.  If you used trailing stops for your long positions you should have had a good run.  It may be time to protect some of those gains.