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The Twilight Zone

This is actually the one I would like to write since yesterday = The Twilight Zone.

The major indeces have entered the Twilight Zone where anything and everything can happen beyond most analysts', traders' and investors' expectations.

The start of the Twilight Zone is hard to know. 

It could have started when SnP500 and Compq produced a non-limiting expanding triangle way back in August 8 to 17, 2009 perfectly executed by ES and NQ on the intraday charts.  A non-limiting expanding triangle is an extremely rare occurence that usually appears at the start or halfway thru a lenghtly process but not near nor at the end.  It is the anti-thesis of the terminal triangle which can only exist at the end of a 1-2-3-4-5 or A-B-C process.

Or it could have started in April 26 culminating in the so-called "Flash Crash" of May 6, 2010,


We are still in a high volatility environment and is therefore anything and everything may or may not happen and may even result in further trading range expansion and/or volatility expansion.  Today and the next several days could prove to be the critical stage for the Twilight Zone.

Intraday price actions have become wickedly unpredictable since the day Goldman Sachs got charged with fraud by the SEC.  I still believe this is the major problem in Wall Street masked by the Greece debacle.

At this stage;  the best course of action is still Wait and Watch I had been advising since mid-April specially for investors.  For traders, it is practically heaven for those well experienced in a high-volatility environment and a whipsaw nightmare for the beginners.

I already sold my ES and YM June contracts bought 2 weeks ago including the Euro$.  Still holding 2 of 10 positions of SSO bought during the last run down.

Will try to buy SDS and FAZ again just in case we go in a sudden-death meltdown once (or if) the i-ii-iii-iv-v wavecount from June 8 has (or already has) completed since the daily chart is still sporting a potential Head and Shoulders pattern with 1147/1148 right shoulder resistance.

Will also try to buy back ES and Euro$ (Sept contracts) if and when we form an A-B-C down that should last 12 to 20 days without breaking the low of June 8 since the last pattern on the 240min chart is an a-b-c wth a c-wave failure - which is the potent "weapon" for the Bulls to break the Bears' Head and Shoulders pattern.

Who's gonna win?  = I don't know.  I am just a bit player- not GS, JPM, and/or MS. Easier for these "3 Horsemen of Wall Street" a.k.a. PPT to co-ordinate their actions and control the markets with the demise of BS and MER and the "unlimited" cash assistance from the Fed.


I changed the wavecount on the 240min chart for SnP500 from my analysis "Nothing Doin" of June 4 when Dow Jones made a lower low on daily in June 8 and Compq a double bottom.   The A-B-C up expected run become practically null and void with Indu and Compq.  It became highly unlikely for SnP500 even when Spx was able to produce a higher low on the same day. 

I also changed the whole wavecount from April 26 due to the latest development with Indu and Compq.

Still unknown is a fair chance for the trio to form a triangle at the lows of their daily charts. 

Be warned it is extremely hard to have a high-confidence intraday technical analysis these days due to the high volatility environment.

Russell 2000 was able to reach the right shoulder resistance at 675.94 today.  It is a grave warning but $RUT is a bit player and went too fast toward it's RS resistance of it's own Head and Shoulders pattern.  14 days to the left usually needs 14 days to the right.  I still expect a somewhat distorted flipped-up mirror image of the left shoulder to form for the right shoulder for most if not all of them - if the bears would want a high probability HnS pattern this time around.  They failed last time because it took only ~5 days (May 6 to 12) to form the RS in May.  This is their second chance.  14 days, give or take a day or two, or else probability for HnS success rate goes down.

Let's see how the 200dma support for Spx will perform tomorrow.  Minor penetration is ok. 

Euro$ is now prime time for a 1-2-3-4-5 down on 24-hr 15min to start forming an A-B-C corrective pattern on the 240min chart.  Hard to gauge timing.  By tomorrow's morning, Euro$ could already forming an a-b-c up to correct the 1-2-3-4-5 still forming at 10:42 pm today.  Target is 1.228 for a 5th with the 1st the longest.  It must not exceed 1.226 down or else it could spiral badly and be in full meltdown mode by tomorrow morning.