S&P 2007 TOP PATTERN ALMOST CONFIRMED

On August 7th I posted three different years of potential top patterns for the S&P: 1983, 2011, and 2007. At the time I indicated the 2007 top pattern to be the highest probability and posted this chart comparison; marking the current location between 2012 and 2007 with the number three.

The S&P had completed three lower highs and we were watching for a marginal new high into Fib resistance.

Just like the pattern in 2007, the S&P index exhausted into a new marginal high at Fib resistance.

Here is the new combination chart of 2012 over top of 2007. We can now match up four distinct completed waves.

Notice the next expected move is below the 200 day moving average to form a double panic bottom with the previous low. This then sets up FED QE3 action that will rocket the market higher to a new marginal high, probably 1500 S&P.

This last move will bring in all players and extreme bullishness on Wall St. However, gas to $5 a gallon along with all other commodities to record highs-the real world economy collapses.

Finally Wall St will realize the FED has used their last bullet. With the market at record p/e valuations, stocks begin crashing down to a 1 to 1 ratio with GOLD. (One ounce of Gold equal to one share of the Dow)

The last two charts confirm our 2007/2012 four data points comparison.

The S&P has moved 270 points in 270 days from the November 2011 low; squaring of PRICE AND TIME into the Fib resistance.

Ninety days from the June/2012 low is September 2nd; another strong time multiple for ending the up move.

The last chart shows a struggling trend that turned Parabolic; ending in a false break high into Fib resistance. Another strong indicator of a completed trend.

Conclusion:

Our 2007/2012 top comparison thesis seems to be the strongest possibility with four similar data points confirmed.

The index has also squared price and time: 270 points up from the low at 270 days. This squaring was on a parabolic exhaustion style move, into calculated Fib resistance.

Should this pattern hold, we can then forecast a move below the current 200 day average on daily at 1333, down to a double bottom either at 1280 to match the June low, or down to 1150, November 2011 low.

We forecast at that time, probably in December 2012, in order to try and salvage Christmas, the FED will panic into QE3, sending the S&P back up a few hundred points to a new and final high. At this time, I believe that top target to be around 1500.

Tim Kathlina

S&P TOPPING PATTERNS TO WATCH FOR

On July 6th I posted this chart with a secondary count S&P price target of 1400. At the time I thought the index could reach that level by the FIB ending date of July 20th.

The market breached the 1400 level today; pushed by the Federal Reserve 600 million repo. The current market environment which sees all news as favorable for stocks, is typical of all topping markets in history.

The question:
Can the FED and ECB reshape financial markets so to never lose, always win, no matter how overvalued, and without short shares, volume, and fundamental support?

Seventy percent of the US economy is consumer spending. The US consumer is now 50 million on food stamps, 100 million no longer in the labor force and the biggest tax paying base, the aging baby boomers, looking to withdraw from the system.

The baby boomers children are still paying their student loans and their kids, the grandchildren of baby boomers have over 1 Trillion in student debt-with NO FULL TIME JOBS AVAILABLE.

What about Fundamentals? Amazon is the number one retailer and should be the measure stick since 70% of the economy is retail.

Amazon currently trades between 90 and 250 times earnings, current and forward looking. Amazon projected earnings growth rate is MINUS 6% and on paper, considering all factors, the stock has an actual value of $20 per share.

The next chart is a big picture S&P view-3.5 years of bull market. The chart has a clear 5 wave higher pattern into calculated Fib price resistance zones.

My point is this: The FED based on money printing alone will have to push stocks higher-to the most expensive in history levels-in order to get another 3.5 year Bull market-5 wave pattern.

Stocks are too expensive, the general public is broke, the % of shorts are at all time lows, there is no trading volume, and the world financial system is imploding; despite QE1, 2, 3, TWIST 1, TWIST 2, REPO 1 REPO 2, etc, etc.

I do not believe the math adds up and there is no way to get around LIQUIDATION-despite the best efforts of central planners around the world. The black debt hole is just too large; insolvent banks like Bank of America, RBS, and Citi, will simply have to be liquidated and their debt holders will have to write off the debts.

The next few charts are comparisons of topping patterns. The top of each chart is current 2012, the bottom half is topping charts for the years 1983, 2007 and 2011.

These previous tops are road maps to what the 2012 top will look like. The second option is- I am dead wrong and the FED will be able to send the stock market to 100xs earnings, with a financial collapse in the real economy, $10 gas at the pump and no jobs.

This first 2012 chart is marked with the time from the June low. Currently 60 days and September will be 90 days. We are looking for the market to exhaust into a final high into one of these time frames.

The 1st chart compares the top pattern to 1983 top. Our current location is marked at number 2.

Second chart compares 2012 with last year, 2011, also marked at the number 2 spot.  Both 1983 and 2011 made lower highs. The difference in the two is the speed of the decline after the final distribution top was completed.

The next comparison is 2012 to the 2007 top. This top pattern is the highest probability because of the similar circumstances. Presidential election cycle, along with collapsing fundamentals that are ignored by the markets.

Our current location I have marked with the number 3.  In this scenario, we will make a marginal new high into the 90 day time period, a fast collapse, a fast recover into the November election time frame, then the first wave lower of a 2 year bear market begins.

Conclusion:

Does buy low and sell high matter anymore? Is this time truly different? Can the stock market for the first time in history, never lose, and have infinite upward valuations?

I got some Tulip Bulbs and a bridge in Brooklyn to sell to anyone who thinks so.

Tim Kathlina

S&P Current roadmap location July 22nd

On July 7th I indicated the next possible date for SPY top, based on our secondary count, would be July 19th or 45 days from the ending 1st wave low.

The SPY index exhausted higher into Fib 13th date July 19th, 45 days from Wave one low, followed by a distribution on July 20th.

Traders should use my updates to look for price and time dates before entering trading positions. These time frames offer the highest probability of winning trades.

For example, after reading my update on July 7th, you would know to wait for the next Fib sequence date, July 19th, and 45 days from Wave one low, to take a short position with a protective stop above $140, our price target for July 19th.

The next few charts continue to build a case for a probable top using the same 45 day pattern from the EW1 low.

We have five clear sub-waves higher:

The 45 day from the low pattern is also showing three thrust higher:

The 45 day pattern once again has formed a Bearish Kicking Pattern:

Conclusion:

SPY has moved 45 days from the June low, ending on Fib 13th date of July 19th.

SPY has 5 countable sub waves up from the June low, three exhaustion thrust into highs, and a Bearish Kicking pattern.

We do not have a squaring of price and time and the index has been able to ignore all bad news to date.

The FED meets August 1st, they will not do QE3 as I have been saying for months now. I will update direction, price and time after the Fed meeting.

Tim Kathlina

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

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

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

GOLD 1ST WAVE BEAR COMPLETED

On March 19th I indicated the GOLD bull run was over for now.

The following chart showing a bearish reversal, with a bear wedge and downside EW1 target of $1500 was posted.

We technically chart GOLD on year over year, week over week. Doing it this way will pull out some recurring patterns.

A 21 week Fib sequence chart, June/July 2011 to June/July 2012 shows significant highs at Fib weeks 5, 8, 13. Expect Fib week 21, the next Fib week in the sequence, to also bring in a significant HIGH, not a low; consistent with the previous week cycles. (Notice I have marked the EW counts in Roman numerals, showing the completion of EW1)

Slow stochastic at the 50% and 80% levels marked previous FIB week highs. We will watch for this to line up with FIB week 21; along with calculated retrace prices between $1590 and $1680.

Once these targets are hit, EW wave 2 will be completed and impulse EW3 down will begin. I will provide downside targets at that time.

The put/call ratio backs up our bear market in GOLD thesis. As the price has moved lower, the put to call ratio has gotten more BULLISH; which is the opposite of what brings about bottoms.

This extreme bullishness in GOLD will help end EW2 and usher in a EW3 sell off.

Conclusion:

Put/Call ratio suggest GOLD has much more room to fall.

Our EW1 low projections from March came in near the exact price. Now we are awaiting EW2 to work off some oversold conditions before a major EW3 impulse down move takes GOLD substantially lower.

Tim Kathlina