Kontent Review

Edited By Jeff Greenblatt

April 13-16, 2006

Greetings:

Since Passover and Easter happen to fall in the same period, happy holidays to all!

This isn't reaching you on Thursday night, but then again, there's still plenty of time before the markets open on Monday, right?

Since there are so many new readers, an explanation of my methodology is in order.  As well, this is a good time for a little advance promotion for the ebook. Those of you who have been here over the course of the past 3 years, this isn't the same dissertation you've read before.....There is a new shift in the methodology used here.

About 5 years ago, I started having my forecasts posted in Club EWI, the Prechter chatroom.  A couple of them worked out very nicely and I was hooked. They also took notice but that's a story for another day.  When they started calling the top of the week back in 2003, I already decided to create a short term update of my own without the agenda of having to live up to a Grand Supercycle Bear Market crash.  I'm not trying to win the Nobel Peace Prize.

I am at heart an Elliottician but those of you who are regular readers know I've been influenced along the way by people like Nison, Merriman, Gann, Wilder, Dorsey, Kaltbaum, Bill Williams, Leibovit and Mark Douglas. You have astrology, candlesticks, momentum, Delta, PnF,  volume, chaos theory, sentiment and psychology. Folks, you can never have enough tools in the shed in this business.

Some of you are familiar with the work of Jim Sloman and Al Larson who are doing groundbreaking research in the area of how gravity and the tides affect financial markets. There is also Erman who has a formula of how the golden spiral affects price movements which differentiates his work from Elliott.  Over a half century ago Bradley figured out a complex formula for computing how the gravitational pull of the various planets affects price movements here on Earth.  Of course, the master of them all was Gann, who was able to translate most of the above in a practical way and apply it to financial markets better than anyone ever has.  Truth is most of these methods are extremely difficult for an individual to master.

What is being done here is I've uncovered a methodology that doesn't take YEARS TO LEARN that is an improvement/enhancement of existing Elliott/Fibonacci cycles and studies.  Others have touched on the time dimension in their work but nobody works with it (especially the Lucas sequence) to the depth done here on a daily basis. When the ebook is done you will see an added dimension to technical analysis over and above price and volume which is simple to recognize once you know what to look for.  Problem is most don't know what to look for.   The beauty of this methodology lies in its simplicity. However simple it may be, don't confuse simplicity with easy.  The best part is how well it complements the technical work many of you are already doing.

There is a small circle of you working with these time sequences who already know exactly what I'm talking about.

If you are a support and resistance trader, these time sequences will tell you the highest probability window when price action will either reverse or break through.  This goes hand in hand with the candlesticks.

If you are an Elliottician, these sequences confirm wave counts. Waves tend to complete on important time bars.  If you are wondering when a wave is going to end, knowing the bar count in the various degrees of trend takes much of the subjectivity out of Elliott.

If you work with volume patterns, cup and handle patterns or anything you might read in the IBD, these time sequences navigate the highest probability window of when there will be a breakout.

If you do point and figure, these time sequences will confirm your box reversals.  As a matter of fact time sequences are leading indicators and give you advance warning of your 3 point reversals.

If you are into astrology, the daily counts work beautifully with Merriman's geocosmic signatures OR the Bradley Model.  As a matter of fact, we know how inconsistent Bradley can be and if your Bradley date does not cluster with a time date, there is a great chance the Bradley turn WON'T WORK. 

If you work with MACD, stochastic or any other momentum indicator you know they can stay at extreme for some time.  However, when we get to an extreme condition usually we get the turn when the market hits the time window.

I don't care if you work with stocks, Rydex, options, bonds, gold, futures, currencies, the European market or the Australian market.  This is a wonderful complement to WHATEVER YOU ARE DOING!  In other words, we are adding a whole new dimension to technical analysis. 

However, you will have to decide if you are ready to incorporate something NEW into your game.  Some of you might be set in your ways and if you don't think your game needs to improve, fine!  But who can't do better?    Understand this, what we are doing here IS NOT A SYSTEM!  This is the natural order of HOW FINANCIAL MARKETS WORK. 

You might be asking, if this is such a breakthrough, why don't we get every call in every market correct.  A good question.  The real answer is this work is a major first step in our understanding of how financial markets really work. The Wright Brothers achieved liftoff but they didn't make it to the moon.  The truth is someday, somebody is going to come out with a formula of how the various gravitational pulls of all the planets affect the tides which affects crowd psychology which affects the golden spiral which affects which Fibonacci/Lucas sequence turns the markets in the varying degrees of trend.  That will be the holy grail and somebody in the 21st century is going to figure that out. Until such time we have to be satisfied in working with the highest probability points in time of a Lucas/Fibonacci sequence turn. Until the Fibonacci Forecaster came along, nobody understood how Lucas does turn the markets.  The good news is what we do here is good enough to give anyone a HUGE EDGE without having to knock yourself out learning about planetary or ocean cycles.  Like whatever else you are doing in technical analysis, this is right there.

What you will be seeing in the future in this column is a further departure from traditional Elliott because while the waves provide a picture of  the mood, structure and psychology of the action on any given chart something is missing. Wouldn't you agree?  With all the subjectivity in interpreting Elliott, wouldn't it be helpful to have something definitive you could sink your teeth into? We don't need to know exactly where we are in the wave count BUT WE DO KNOW WHEN NASDAQ HITS 262!!!   You know what I'm talking about.  It is these time principles that are leading the waves. Even with the time methodology, for the reasons mentioned above, there will be plenty of times where these markets are too complicated to read.  All I'm doing is helping us to have greater understanding of how these markets work in a practical and simple way. Again, don't confuse simple with easy.  However, if you could increase your understanding of how financial markets work even by 5% a month, what would that mean to your bottom line in the course of a whole year?

THE STOCK MARKET

It seems these holiday periods get longer all the time.  Trading slowed early Wednesday and for goodness sakes, the markets weren't closed until Friday!  As of Tuesday night, we knew the markets could have elected to bounce from either Tuesday's low which was a small degree 61% retracement or in the case of the NDX for instance, the larger one at 1678.  We know what happened.  However, Thursday was the full moon and also a potential near term cycle point.  We did not set a low there as we could have done.  My concern, as I see so many times on these charts as we enter potential turns is we end up turning early but it actually is just a SPIKE or a headfake.  To give you an idea what I'm talking about.  Thursday afternoon on the NQ we were in an intraday downtrend.  On the 5 min chart we were already down 57 bars.  At that point you can anticipate a potential low on bar 61-62.  However we hit 57...58....59 THEN WE BOUNCE up for 60...61 and a sharp spike down on 62 and then 63.  My point is when we turn early, often times it just turns how to be a SPIKE created by an inversion of the cycle.  Why this happens I HAVE NO IDEA. But it happens.  So if the full moon is the potential near term change, we turned 2 days early.

From what I've seen so far, the biotech topped early just like it bottomed early back in 2002.  This condition was noted here weeks ago in the dissertation of market tops.  The biotech still shows no sign of a lasting bottom.  The high created by the NASDAQ as a result of the 262nd hour turn to this point is a more impressive calculation than whatever I've seen that created Tuesday's low. 

Problem here is when I look at the SOX on an intraday basis since Tuesday's low I see absolutely nothing.  On an hourly basis or a 15min we have a virtual trendless market.  We have to go to the daily chart to pick up the trend. The bottom line is the drop we had on April 7th was the 26th bar off the last major pivot on March 2 which kicked off a small wave down.  I bring that up because if we were now in a new uptrend we likely don't drop on that bar the way we did.  The wave up in the SOX also had a squaring of time where the first leg up was 16 hours compared to the whole leg that reversed on the 16th day.   The whole move was 38.43 points which has a good Fibonacci relationship.   The bottom line to the SOX right now is the micro trend is sideways but the weight of the evidence suggests the larger trend is still down.   For now the bias is sideways to down.

As far as the NQ or NDX is concerned, we were up 21 days and down only 3 days.  I don't think there is enough time in this leg down. The Dow hit a low in 16 days and the bounce hasn't been too impressive.

BOTTOM LINE:  Thursday Nasdaq volume was 1.6b.  You can chalk it up to the holiday but still its a light volume bounce.  We still determine market psychology by greed and fear.  If buyers really wanted to buy they would have put up a better show.  Unless I get evidence to the contrary I'm viewing this as a B wave bounce, an inversion, whatever you want to call it.  Key resistance in the NASDAQ is 2347, NDX 1729, Dow 11221 and 1301 in the SP500. This leg up is not done and I don't think we've seen the low yet. So what I'm looking for is slightly more upside with a higher probability drop to larger support levels. 

AUSTRALIA

I think we could take a lesson from the folks down under who are on an extended holiday from trading.  Markets closed early on Thursday and correct me if I'm wrong, are closed until next Wednesday. I'm sure my friends down under will come back renewed and refreshed.  The move so far looks corrective but the big recovery day was nullified the next day.  The reversal hit in the time window we've discussed for the past 3 weeks.   Finally, trading ended earlier on Thursday so there is not anything new to add.  You will come back from the break dealing with a corrective pattern off the high which is likely not done.

GOLD, SILVER AND THE XAU

The story here is the XAU continues to lag the metal.  I'm not here to tell you why that might be from a fundamental basis.  What I do know is we've retraced 78% of the selloff and there are 2 technical schools of thought working.  First, from a pure wave basis, there is a chance we've had 5 waves up that completed to the recent high.  The other view, which I favor and explained last time is the time progression off the low.  To review, the first wave up was 29 (Lucas) hours and the next move was nearly 76 (Lucas) hours which gives us a 2.618 C or 3rd wave extension in terms of time.  The pattern off that recent high looks sideways and is setup to test the recent secondary high at 149.  That's as far as the waves reveal.

Gold has put in another nice impulse wave off the March 10th low. If we look at this from a pure common wave relationship, the 1.61 extension point of wave one as measured from the bottom of wave 2 was back on March 30 around the 592 area.  Common sense dictates that if we didn't stop at a 1.61 extension, the chances are good we are going to get to the 2.61 extension point.  However, we've been hung up now this entire month of April at a point that traders look to take profits as previously mentioned. That would be the drop from March 2-10.  Folks, that's not an iron rule that is set in stone but there is a segment of participants that do look at things that way. We've been hung up going sideways in this general area for 2 weeks.   The first leg up off the 10th was 24 points and we hit that secondary low at 550.  A 2.618 extension is 62 points and would take us to 612 which is right in my zone for a longer term high (610-618).  To give you some kind of idea of the internals of this chart the first leg up here was 18 hours and we pulled back for 18 hours.  The next leg (which surpassed the 1.61 price extension) took a 3 day pause after going up 62 hours.  If you divide 18/62 you get .29 (Lucas).  Mind you, some of these arcane relationships are not to be traded upon but when you try to figure out what IS going on, the market supplies evidence in not so obvious ways.   At this stage of the game we've expired many time relationships that COULD have reversed this chart (like it did the XAU) but DIDN'T.  I'm looking at a sideways pattern here that will likely end up chopping its way to that 612 marker.

Silver had conditions that could have created a bigger pullback back on day 147 of the trend last week where it put in that doji but the chart was still way too strong.  Now, Monday is day 156 of the present trend so we are very close to a potential turn window either here around day 155 or in a week when it gets to the 160-62 time frame.

BOTTOM LINE:  You can go elsewhere to hear about the bull market as we've reached some sort of point of recognition.  Consider that after a point of recognition is reached we must be closer to the end of the wave than the beginning.  What I'm attempting to do is stay on top of points in time that could surprise people and create the reversal that seemingly comes from an invisible ceiling.  

US DOLLAR

We may be close to a break in one direction, likely no longer than 3 trading days from here.  If we were to go down, we will be 18 days off the last pivot high by Wednesday and a downtrend will respect that pivot.  On the other hand, we are 6 days off the low and either Lucas 7 or Fibonacci 8 will cause a break north if we are respecting the lower pivot.  See how this works?  If the triangle scenario holds, we have already seen the low and should head higher.  What is interesting is I've heard quite a few analysts (including Arch Crawford) trash the dollar recently but it is hanging tough in the face of continued strength in the medal. One thing dollar bears have going in their favor is the recent low is 52 days off the January low and if we were going to break out I would have preferred to see the reversal come on an important Fibo or Lucas pivot but we didn't.  We bottomed on 18 days to the near term trend which gives me reason to believe we are not ready to break to the upside yet.  The bottom line is I'm slowly losing confidence that we have a completed triangle that is ready to break to the upside. If my analysis isn't crystal clear it is because the chart isn't crystal clear.  IS IT?

BONDS

Tuesday night we were discussing a small degree inversion and that's exactly what happened.  The discussion centered on what happens when we get close to an important set of bars.  In a continuing trend they can spike or dip into the window and keep the trend in place alive.  What happened here as opposed to a 3 day spike (bars 60-62), we spiked on day 60 but made a fresh low in day 61 which where we closed the week.  Now the momentum indicators are at least level to the point where there can be considered a slight positive divergence.  I think we are close to a bigger bounce.

CRUDE OIL

We are at the moment of truth.  A retest of the high that either creates a double top or a larger basing period that could launch a new wave of aggravation motorists everywhere.  Luckily we are in a position where we are right at a cluster of relationships THAT COULD TURN THE MARKET.  Wednesday we hit the 39th day of the trend (FBI 38.6) and Thursday we hit the 199th (Lucas) hour which set a lower high by 5 cents. There are other relationships that could reverse this market but unless we would see an overpowering black candle come in that would tell us we've definitively failed at resistance I wouldn't see it as anything more than a pullback.

Jeff