Tuesday, June 28, 2011

Comments and outlook for 06-29-2011

Strike two!!  OK, not a swing and a miss - more like a foul ball.  I talked about the 22TD cycle last evening and how it was hard up, but thought maybe it would lose some of its upward "mo".  It didn't.

So let's try again.  Tomorrow the 22TD cycle should top by EOD or early the following day and as it is topping it should lose its ramp up momentum.  We have the 22TD cycle up and topping toward the end of the day tomorrow. We have the 11.2TD, 5.6TD, and 2.8TD cycles down and bottoming toward the end of the day (or early the next day).  This should limit the upside for the 22TD cycle.  There are a cluster of tops 1298-1299 so I am expecting this may provide upside resistance and limit any upside tomorrow.  We may see 1300, but I doubt we approach the next FIB at 1310.30.  WARNING: I could be off by 2-4 hours in regards to the top.

In addition to the 3 shorter cycles being down we have the 20 week (Wall) cycle down and the 1 year cycle ready to bottom in early July.  Given this setup I do not see how there is a lot of upside left before we reverse to the down side as soon we will have the 22TD, and the 20week cycles down and the 1 year cycle bottoming...  So tomorrow I expect very moderate upside, but possibly red by EOD.

Here is the SPY visual:

GL traders.  Do your own analysis.


  1. I respectfully disagree. We have a $VIX buy signal. See http://stockcharts.com/h-sc/ui?s=$VIX&p=D&b=5&g=0&id=p71455061291. Also there is a seasonality now coming into play into the 4th of July. I have a hard time swallowing this myself, but right or wrong this is what I see. I am neither bullish or bearish but I try to follow the path of least resistance.

  2. TT

    OK. Looking at the VIX chart: What are your rules for determining a VIX buy signal? How many years have you backtested per these rules?

    I cannot discuss that "buy signal" if I do not know the reasoning. I do know based on how I interpret the VIX there is no trend change signal (discussed in prior posts).

    You should always make decisions based on your own analysis (not mine).

    I have no problem with disagreement, but prefer more detail than "VIX buy signal" and "seasonal strength" if I am to give it proper consideration.

  3. TT

    Don't like to shoot from the hip - so I did a little research:

    Hot Julys and Summer Rallies

    By Christopher Mistal
    Although, July may be the best month of the third quarter for the Dow and S&P, that is not saying much. Performance for the other two months, August and September, is negative for the most part. Two recent “hot” Julys in 2009 and 2010 when DJIA and S&P 500 both gained greater than 6% have boosted July’s average gains since 1950 to 1.2% and 1.0% respectively. Such strength inevitability stirs talk of a “summer rally”, but beware the hype, as it has historically been the weakest rally of all seasons (page 70, Stock Trader’s Almanac 2011).

  4. im short and believe to start with gap down tmrw in my model
    more confusion before greek vote

    and on your chart, every trend up rally during a down swing cycle (22,11,5 days) was a great entry for short
    we have all of them bottoming tmrw at close

    rationally, this is a great short opport

  5. forgot to say, i really appreciate your posts!
    i have been following u recently, but remember last week you were nailing it and believe last couple days is simply one of those days every trader has go to through sometimes

    good trading!

  6. Samz7 - I have tried to totally honest with people that I will get it wrong sometimes (news affects cycle action or I misnterpret the data, or I am wrong in my estimate of the strength/weakness of the cycle combo.

    I appreciate your comments. Anyone who has tried to predict daily market action (and tracked it) will find if they are right 60-70% of the time they are doing pretty darn good.

  7. I am trying to repost my $ VIX Chart. For some reason the chart did not show up as it should have. See http://stockcharts.com/h-sc/ui?s=$VIX&p=D&b=5&g=0&id=p35316818427. If it does not shoe up and appear to be self explanatory then email me directly at tjllatt@gmail.com. In any event you buy when the $VIX returns into the Bollinger Band but be ready to go when it is above the Bollinger Band.

    Also the seasonal strength is just before any Holliday and not for the month of July.

  8. Tom - yes, I had seen that proposal of VIX as an indicator before. I also looked at it and found it has a decent record, but can give false signals.

    I encourage you to use whatever gives you the results you want. As I stated in the general statement of my blog - cycles is one tool and should be used in conjunction with your other analysis. Good luck.

  9. Inlet. Glad you saw my amended comment and chart. Yes you are right about the $VIX. Nothing scientific but my observations over the years indicate that if it is right it is really right. Like everything else it can be wrong. I think personally that after the 4th of July the market will have a really hard time into the fall. We will see. Need a way to carry these comments to the latest post.