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Dr. Stocks-PHD Twenty year Wall Street veteran. Hollywoods direct line to Wall Street. Specialize in market timing and predictive modeling. Follow my updates via twitter/tkathlinastocks and at my blog http://traderstocksets.blogspot.com/
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  • S&P JULY COUNT PROBABILITIES JULY 7TH

    In early June I indicated June 19th to be FIB day 21, a day of potential significance for a high or low.

    Reviewing price action into this date on June 25th: based on heavy selling, over bought RSI<2>, over bought Stochastic and 61% retrace of the low, a higher probability was favored for this being a ending sub wave; expecting the next significant date or time to bring in Wave 1 completion. (Remember, I do not favor a count with WAVE1 already completed.)

    I indicated a secondary probability of the index exhausting into a high on the next significant date or time. The next significant date or time was noted as July 1st thru 10th, or 90 days from the yearly high.

    Turns out, Fib 21 day was a bear trap. Despite no reason for the market to push higher and every other tradeable asset class reacting as expected to the bearish reality, the stock market pulled another rabbit out of the hat. With this in mind, we need to explore the secondary count probabilities.

    The secondary count assumes EW1 completed at the 200 day moving average.

    Starting a FIB count at the 200 day low point, FIB day 5 brought in selling; FIB day 8-just hit, again bringing in selling.

    EW theory does not allow for sub wave 3 to be the shortest wave. If FIB day 5 was the completion of sub wave 1, then it is likely that sub wave 3 will complete on July 19-20th, FIB day 13; 1.61xs sub wave one, or 1400 S&P.

    Because major wave 2 can not retrace all of major wave 1, sub wave 5 would then need to be truncated or not exceed sub wave 3. The large retracements that we have seen is another reason I favor the primary count.

    Notice in the secondary count, sub wave ii of major EW1, retraces almost all the way back to the April high and sub wave iv does not overlap any of sub wave ii. These are strong indications that this count is wrong.

    The next chart is my preferred EW count. This one is easy to read and understand. SPY has a megaphone downtrend pattern for EW1. SPY exhausted higher into FIB day 8 to complete sub wave iv. Now we expect a pull back to our previously defined target of 1220 range to complete EW1.

    The next two charts give us some technical indicators to watch that will clarify which count, primary or secondary the market is in. The third option is a massive bull market and both counts are wrong.

    Two common candlestick patterns are bullish and bearish kickers. A bullish kicker will have three red lower low candle patterns in a row and the fourth day kicking higher-a bear trap. The bearish kicker is the opposite, three white candle patterns with a break lower on the 4th day and follow thru-bull trap.

    The important thing to note is all patterns in technical analysis are only as valid as the trend they are in. In other words, if the trend is higher, and the market shows a head n shoulders, the pattern will fail. If the market trend is lower, the head n shoulders pattern will work. (This is an omission that many miss in technical writing attempts)

    The SPY chart shows both bullish and bearish kickers in the uptrend leading up to the April high. Note that the Bearish Kicker was denied by the market moving higher, again a bear trap. The Bullish Kicker was very profitable to longs as the weak hands got shaken out, given bulls a lower, thus more profitable entry point.

    The Bullish Kicker worked, because the larger trend was higher.

    The point of all this is the SPY has a bear kicker into the 90 day from the high window on FIB day 8. If we are in major wave 2, then this Bear Kicker will be a Bear trap and we can expect the market to move higher into the July 19-20th, FIB day 13, price target of 1400 S&P.

    If my preferred count is correct, then the Bear Kicker will be valid-moving the index lower to complete EW1.

    The next chart reveals longs are profitable at SPY 132. Secondary count Wave 2 would allow the market to test this area, then bounce up to complete sub wave iii at 1400 around July 19th-20th.

    If my primary count is correct, SPY will break below 132 after a small bounce test, sending bulls into panic selling mode; bringing in the completion of major wave one about 80-100 S&P points lower.

    The third option is while ROME burns, we all play fiddle and watch the S&P soar to all time highs, 100xs earnings p/e, along with $100 per gallon of gas, $1000 oil and $50,000 per share Apple.

    Tim Kathlina

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: SPY
    Jul 07 11:04 AM | Link | Comment!
  • USING THE US DOLLAR FOR STOCK DIRECTION

    Central Banks around the world continue to fight natural market forces. They continue on the one hand to print funny money and junk bonds to float the insolvent banks while on the other hand stealing from their countries citizens life savings and pensions to pay for it.

    The problem the Central Banks have is the world has a system of natural performing markets that price in risk and reward according to the reality of today or tomorrow.

    Foreign Bond yields for insolvent countries like Spain and Italy and commodities have overcome manipulatation by Central Banks.

    Central Banks have thus far been able to hold currencies at bay and keep stocks a float. As will see with the US dollar charts, this leg of deception is also quickly ending.

    The 1st US dollar chart represented by the ETF UUP is a daily, volume by price chart. Volume by Price charting gives us an indication of where the largest amount of purchases/sells are; in other words resistance or support. The chart indicates strong support and potential short covering above the $22.75 price point.

    The dollar found resistance at the 50% retrace of the June hi-low range-normal for all tradable assets. Expect this to be resolved higher after a one to seven day consolidation of the no QE3 bounce.

    Next we look at a weekly, multi year time frame. Note the Inverted Head n Shoulders formation that has taken over a year to establish. This lends credibility to the market winning out over the Central Banks.

    Duration of time is the key technical; true trend changes take months, in some cases a year or more. If this pattern were of a fast nature, then it would be void. The validity of a pattern depends on the larger trend.

    Trends take time to change and the US dollar trend is now up; despite the best efforts of the FED.

    Here we are looking at a daily one year time frame. The key technical take away here is higher lows and higher highs.

    Conclusion:

    The US Dollar trend is up. Only QE3 will put a stop to this, but stocks are too expensive and Presidential election too close to allow the FED to begin a massive printing campaign.

    A rising US dollar will sink the US market and corporate earnings when S&P 500 companies have to repatriate foreign earnings back into a value increasing US dollar.

    Tim Kathlina

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: UUP
    Jun 26 10:19 PM | Link | Comment!
  • S&P JUNE 25TH TIMING UPDATE

    On June 5th I posted this chart, indicating we had completed FIB day 13, and to expect a significant change of trend on FIB day 21, or June 19th. At the time, the current best EW count led me to lend strong weighting to the probability of FIB 21 day, June 19th, bringing in a significant low and completion of EW wave one.

    The next chart shows on June 19th, the exact FIB 21 day, did not bring in a low, but a significant HIGH.

    The market found support at the 200 day moving average, and then retraced 61% of the April to June high to low range-ending exactly on June 19th, with a significant distribution day.

    I have indicated that I do not believe the EW count is correct and will need to be adjusted. I am still of this opinion. I do not believe EW1 has completed-thus I have not listed those counts up on the current charts.

    The significant low came at 60 days from the April high and squared with price at the 200 day moving average. The next significant point in time is at the 90-99 day from the April high, or the first week of July 1st thru the 10th.

    My expectation is for the index to complete EW1 within this July 1st thru 10th time frame. There is a lower probability of the index completing a significant lower high within this time frame; but as of this writing, the odds favor a final exhaustion into a low-somewhere between 1220 and 1180 for S&P.

    Conclusion:

    The FIB 21 day of June 19th, brought in a significant high-61% retrace from the 60 day low.

    Based on Slow Stochastic overbought condition, FIB 21 day, and RSI(2), the index now sets up to complete EW1 at the 90 day time frame from the April 1st high, or July 1st thru the 10th.

    Expected low range is between 1180 to 1220-extensions of varying degrees from the 60 day low.

    Tim Kathlina

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: SPY
    Jun 25 11:10 AM | Link | Comment!
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