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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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  • NETFLIX REVIEW MARCH 22ND
    I got a question about NETFLIX, so lets take a look.

    This is a one month chart looking at volume by price support. The largest volume/price range was tested numerous times, $105 per share. This level thus can be considered solid support allowing upside calculations.

    Stocks typically move in these intervals: Base x 1.15%, 1.25% and 1.40%. Currently, NFLX has moved 1.15% from base. It is a 1/3 probability that this move, from the base, is now completed; leaving open the resumption of the downtrend.

    If NFLX can take out 1.15xbase or $120, it becomes probable that the shares will reach $131, then $147. The daily candles have not given any sell indicator to this point, nor have we seen any volume resistance.

    Looking at a 1 year cycle, NETFLIX has just moved past FIB week 13, counting from the high in July. The next FIB ending date will be Fib week 21, week of July 20th. We can expect what ever trend NETFLIX is in, to continue into Fib week 21.

    Question: What trend is it in?

    Technically NETFLIX is in an UPTREND. Not pictured on this chart, but If you look at a 3 year chart and run a 200 day mva on it, NETFLIX has retaken the 200 day, thus it's in an UPTREND until proven otherwise.

    Now, here is where it gets tricky. Because NETFLIX moved from the high above $300 a share, almost nose diving to the most recent low of $65-this leaves 2 unresolved problems.

    Problem: 1--We are not able to count with any certainty, the typical EW 5 wave bear move into completion; there just isn't enough time lapse and distinctive waves.

    Problem: 2--Even though the shares have retaken the 200 day average (which is technically an uptrend), the retrace of the $300 to $65 range is well within normal BEAR MARKET retraces.

    We would expect the retrace to be able to do 38%, which would be $147, or 50% from the low, which would be around $170.

    Given that the retrace HAS NOT BEEN ABLE TO DO the first target of 38%, $147, this is a fairly weak retrace. The current up move could be a 5 mini wave move to complete a standard 38% retrace, not a NEW BULL MARKET MOVE.

    In this light, IF THIS IS ONLY A RETRACE, it points to much, much lower share prices.

    

    Conclusion:

    The bounce off the $105 level with volume support was an easy set-up catch. The stock bounced 5-7xs before making its move, giving plenty of time to enter. The upside targets of 15%, 25%, 40%, again are easy figures to trade into. Which means 1/3 of the easy trade has now passed, maybe all of it.

    Was $65 the multi generational low of a lifetime or just the 1st leg down in a 5 wave bear move? This is the question that has to be confirmed beyond doubt, in order to take a long term investment into shares of NETFLIX. Right now, I DO NOT HAVE THE ANSWER to that question.

    Given my expectation of a broad market pull back, the fact that we went into FIB week 13 declining, and the shares have not been able to retrace above 50%, which is $170, there is not enough clear direction evidence to risk being long, without proper PUT OPTION protection or trailing stops.

    I'm willing to set this out until the completion of FIB week 21, ending week of July 20th, before considering a position. This gives both the broad market indexes and NFLX time to sort out direction.

    RISK/REWARD ratio of possible $20 higher from here, verses $100 possible DOWN is just not favorable. The are better odds to be had somewhere else.

    Tim Kathlina

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

    Tags: NFLX
    Mar 22 4:07 AM | Link | Comment!
  • GOLD UPDATE-BULL RUN IS OVER
    On Feb 16th, I posted this headline from CNBC and indicated it to be a warning sign to Gold bulls:

    Today from CNBC we get: Gold Demand Hits New Records as Europeans Stockpile. Demand for gold hit an all-time high in 2011 as European, Indian and Chinese demand soared. Total demand around the world rose to 4,067 tonnes, worth around $206 billion - the first time annual demand for gold has risen above $200 billion

    On Feb 16th, I posted this chart counting Fib Weeks and indicated a major direction change in Gold was possible that will carry on for the next 34 weeks.

    Working our way from 2 years inward, we can see a big gap lower off a blow off top, which has now moved into defined 5 wave pattern.

    Most of the GOLD Fibs move in 61% increments, so my price target to complete Wave 1 of an epxected 5 wave bear move, is at Line 2.

    The 1 year view has a better look at the alternate 5 of 5 count possibilities. Again, I put a higher probability at the 61% range down because of history; but, 38% at 1500 Gold for the end of Wave 1 is possible.

    Keep in mind, the stock market doesn't even realize GOLD is in a 5 wave down.

    This is 3 month chart. Price projection here supports the 50% level, which is standard for all markets. We simply take the length of the initial move into the bear flag, then add that length coming out of the bear flag.

    On Feb 16th, I posted this chart showing the relationship between the Euro and Gold; they tend to move hand n hand.

    Here is a current Euro Dollar chart. We are clearly in the process of forming a Head N Shoulder pattern, solidly below the 200 day moving average. Very bearish for the Euro, very bearish for GOLD.

    Conclusion:

    Gold has moved out of the Feb 21 week to the down side. Gold has crash below its 200 mva and is now working a 5 sub wave down pattern to complete Wave 1 of 5 Wave's down.

    I was asked on Feb 16th; "Will Gold move higher because of Greece issue". My answer was then and is now, NO. Because, Banks will have to sell gold to raise cash; because they are insolvent.

    War with IRAN and $150 oil, might turn this around, but I suspect GOLD will complete 5 waves lower to finish up around $1200.

    Remember, the bear market will not come to a close until Gold and the DOW are 1 to 1 in price. Which means GOLD once it completes the 5 waves lower, will be a great buy-but not until then.

    According to Stock Traders Almanac, the last week of March is usually good for Gold-so expect WAVE 2 recovery maybe around that time frame. (If they are correct)

    Tim Kathlina

    Tags: GLD
    Mar 21 9:44 PM | Link | Comment!
  • MARKET TIMINING UPDATE MARCH 19TH
    Over the past two months we have looked at numerous potential turn points for this 3rd of 5 wave bull market rally. Wave 3s move in typical 1.618, 0.618, or 2.618 of measured low-high length of wave 1's.

    I have not made an update since March 9th, the reason being we were not close to any top numbers either in time or price-thus I haven't had much to say.

    This last strong move, which I believe is a 5 of 5 of Wave 3, awaiting completion, has been led by Financials.

    Financials have been very strong despite the fact the reality is some of these large banks will fail and only exist today due to free money, printed out of thin air, from the Central Banks. (The fundamental reasons never really matter, when trying to earn money in the stock market)

    FAZ today formed a Hammer candle below the calculated Support<2>, combined with < 1 RSI<2> reading. History suggest that banks will begin to under perform the market going forward, until the overbought condition is corrected.

    The question is-DOES THIS BRING A CLOSE TO WAVE 5 OF 3 AND USHER IN WAVE 4 CORRECTION?

    This chart is of a long term topping pattern known as: 3 Peaks and Domed House. Some well respected technical traders are watching the markets in relation to this long term topping pattern.

    The question is-WHERE ARE WE AT IN THE DOMED HOUSE?

    Here is Doug Kass of SeaBreeze Partners take. He has us squarely at the top at point 23.

    Based on my belief that we are in a 3 of 5, not a 5 of 5, I doubt we have reached the top of the Dome.

    In fact, based on the extreme upside we have seen in stocks like PriceLine and Apple, ala 1999, and that we are in an election year, we have to consider a top of the S&P well beyond 1500 as possible.

    In the short run, we are looking for a completion of Wave 3. Here is a Kagi chart showing 3 successive 2% closes, outside the BBands,with not one single red sell signal in between.

    Week to week fund flow data shows every month, money coming out of the stock market and has been for a long time. So, this extreme bull move is purely on Central Bank money printing.

    The primary banks can not make money any other way, which is why every week Wall St calls for QE3. Free money and an ever higher Russell 2000 is the only game they have left.

    I have noted on the SPY a 180 day time cycle from the October 2011 low; first week of April. This can bring about the beginning of the 4th wave correction.

    Summation index measure the health/breadth of this rally. I have the $SPX overlayed, with EW counts. I'm running an 8 period mva.

    Summation index is calculated by advances minus decliners. Currently we see declining stocks are out numbering advancing stocks, even though the broad index continues to make new highs. Big RED FLAG is issued when we move below the 8 period ma, as we have now done.

    Notice after the completion of 5th waves, the index makes new lows, filled with impulsive fear. Then notice the WAVE 1's of the new up cycles, filled with impulsive strong buying.

    I drew this up for you, because this is how you make the most money; by catching these impulse moves. The biggest, easy profits are in these wave/impulse turns.

    You can beat your head against the wall trying to catch the next $20 in Apple or the next $2 in Bank of America, as the stocks swing back and forth daily; or you can count the waves, adjusting, readjusting the counts and price targets, positioning yourself for the turns as they get near.

    This is why we are accumulating TVIX down here. Because we believe we are in a 3rd wave, 5 of 5, about to move into 4th wave impulse down.

    Too many novice traders get hung up on bottom price and exact timing. Let me clue you in: YOU WILL ALMOST NEVER BUY AT THE EXACT BOTTOM AND TIME.

    $OEX50 breadth indicator measures % of stocks above 50 day. This just shows that the market is at the top of its capability to push a broader amount of stocks higher. This is not a valid time indicator.

    Keep in mind, once markets top, they tend to go into long distributive patterns that generally can last 3-6 months.

    This indicator may suggest a Truncated 5 wave, SPY making lower high to complete the trend.

    Here is the XIV which moves inverse of the $VIX. I like trading the Volatility index, especially now days because there are so many good ETF and ETN products to use.

    XIV is one that we will pile into, once we see a completion of 4th wave, and the $NYSI retakes the 8 period moving average. (We will cross that bridge latter)

    You can see the XIV has closed outside its upper BBands, same as the SPY, and is nearing calculated resistance. Again, this is a wait and see for now.

    Despite price/time technical possible turn dates past, the market has sailed past them by gaping above these resistance areas via the pre-market futures ramps.

    The question is-WILL THE FED USE THE SAME BAG OF PRE-MARKET FUTURES RAMP TRICKS THIS TIME, OR IS OIL TOO HIGH AND WAR WITH IRAN TOO CLOSE-THUS THEY NEEDS STOCKS TO MOVE LOWER?

    Finally here is a chart of TVIX-which has performed very well verses its peers the last 4 trading days. I also like that as of today, the TVIX and $VIX are now 1 to 1 in price.

    This chart technically doesn't tell us a darn thing. (Sorry, I know you were hoping to hear otherwise)

    When TVIX gets a point and figure or Three Line buy signal, I will let you know. In fact, I am waiting on that to purchase more shares.

    What I can say is, stocks will do 1-4 day counter trends within the existing primary trend (which is down); this expired today. If TVIX can push higher tomorrow, then we are getting somewhere and I will probably add to my stash.

    Keep in mind, if you buy TVIX at $17, or $14, DOESN'T MATTER. Your accumulating for the 4th wave turn.

    Now, I sold TVIX last time at $20, because it was clear, the market wasn't going to turn, thus locked in some profits. But, I have been buying it back on the new lows.

    Being down a few points on TVIX is like Kentucky Basketball being down 10 points with 35 minutes left to play. (It ain't a big deal, don't fret about it)

    Conclusion:

    Once again, the markets are moving into a period of price/time ratio that could bring in a 5 of 5 of 3rd Wave top.

    Until this top is in, and the 4th wave is in motion, my post have been a little less in frequency. If I'm not saying much, its because nothing has changed and we are not near any price/time targets.

    I've said this before, will say again, don't be surprised at how far this market can go up, and by the same token, don't be surprised at how far we are going to go down. (I expect S&P to bottom around 400)

    We live in times of extreme bubbles and extreme collapses, this time will be no different.

    Tim Kathlina

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

    Additional disclosure: I am long TVIX and will add to the shares as noted or sell the shares without notice based on chart patterns.

    Tags: SPY, TVIX
    Mar 19 9:19 PM | Link | 4 Comments
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