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

S&P-SAME DANCE, DIFFERENT DAY

Once again, another trading day, another large up futures pre-market, no volume, skip the down gap day, just as a down is to be confirmed. We have seen this no volume, futures pre-market ramp, just as the bears are about to take control for months now.

Here's the thing that even Central Banks can't get around. They ultimately have to have at least one sucker to sell ever higher Apple shares to. The higher the markets climb, the thinner the sucker pool is; just by the shear fact that nobody has enough money to buy enough shares to be worth it.

One hundred shares of Apple today cost well over $50,000, just for a measly 100 shares. How many people can afford that? How many people can the FED convince to risk $50,000 to maybe get a 30 point ramp, making $3000?

I wanted to show you this chart. This is a KAGI chart. When we look at technicals, we try to use as many tools and views as possible.

KAGI charts what ever % you define it to. This takes out the NOISE associated with day to day trading.  I have this chart set on 2%. So, the red bars get you out of the SPY, the black bars, representing an uptrend, get you into the SPY.

Notice the last few days are all black, so the 200 point gap down, did not even stir your coffee.

I find this chart in something like TVIX, that can make HUGE moves, when into a confirmed uptrend, will help keep the stomach ulcers at a minimum.

Set your RSI at a level that has worked well in the past; then assume the same going forward. I have RSI for SPY set at 3, along with running a BBand over the shares.

Between the two additional indicators, we are able to exit SPY around the tops, then safely re-enter when the KAGI goes from red to black.

As you can see, RSI sell indicator has already been triggered on the last high. SPY is currently in day 2 counter trend, with a bullish gap fill. Look for the index to fail here or be making a new high by Tuesday next week.

Tim Kathlina

S&P TIMING UPDATE FEB 26TH

On Feb 10th, I posted this SPY yearly chart.

At the time it was my belief that we were in a 3rd wave, minor five, and that the END OF THIS MOVE WILL BE SOMETIME THE WEEK ENDING FEB 24TH, or shortly after.

I put out the possibility that SPY could trend down into this FIB TIME. Previous years the index moved lower into the 13 week Fib time frame; we had to consider this a possibility.

We know now, despite the loss of positive momentum into this 13th week, noted on RSI<5> and <2>, the index has been able to grind higher.

We can now count 5 minor waves up on the daily; lending credence to the top call for week ending Feb 24th.

Drawing a resistance line, which marks all previous tops in this minor wave 5, allows for an additional 10 points of upside in the SPX; into R1 at 1376.

Previous pull backs within this up wave have not exceeded 20 points-the index must move lower greater then 20 points and 2 days, to confirm a wave 4.

Our immediate near term downside targets are marked at the pivot: 1301 and resistance <1> 1270.

 I have previously noted, the expected time for completion of wave 4 is 4.7 weeks.

In forecasting, we always have to assume alternatives-here is a weekly view.

Notice R1 gets us all the way to 1393, however our downside targets are much more bearish: 1234, 1098, 938. These are a probability, but more likely summertime pullback targets.

Notice weekly RSI<2> is almost 100. Hard to go much higher then that!

Conclusion:

FIB week 13 is completed-ending Feb 24th. We are able to count 5 minor waves, suggesting a top of some sort.

R1 target of 1376 and top resistance line allows for an additional 10 points higher to complete this move. RSI divergence indicators however, suggest a beginning to wave 4 can come at any time-day-hour.

We expect at least a 70-100 point wave 4 decline, possibly more; completing within 4.7 weeks-give or take a few days.

Monday Pending home sales at 10:00. On Tuesday Durable goods orders, Case-Shiller and Consumer confidence. Wednesday Q4 GDP, the Chicago PMI, and the FED’s beige book. On Thursday, weekly Jobless claims, Personal income/spending, PCE prices, ISM manufacturing, Construction spending, and monthly Auto sales. On Tuesday, FED governor Duke testifies before the Senate on Housing. Then on Wednesday, FED chairman Bernanke testifies before Congress on Monetary policy.

I expect all this data to be the usual web of lies and deceit, in an attempt to continue multiple expansion.

Tim Kathlina



BEFORE THE BELL: TIMING UPDATE USING JUNK BONDS FEB 15

Number one thing a trader must do is trade with the trend. The toughest part about that is when the trend is so far stretched; when to start trading against it for the turn. If you don't catch the turn, you get creamed in the opposite direction shares you have, and you miss easy money going the other way.

I would rather go ahead and pick stocks that are breaking down now; then to try and catch another few points in a stock that is parabolic. (AAPL)

I have begun trading against the current uptrend. I believe history and the data supports this switch. The market has only moved like this 3xs in history, one of them being 1929. We all know what happen then.

Here is AAPL presented without further comment to illustrate my switch to short side. Notice S&P keeps pace with AAPL.

Next chart is % of stocks above their 200 day average, over layed again with S&P.  RSI<10> has proven to be good early warning tool for this indicator. Notice in TOP<A> once RSI 10 rolled over, S&P went up just a little more.

The thing to note here is the S&P index managed to hang around this top for a few months, while the % of stocks in the S&P above 200 day continued to roll over.

This backs my earlier statement, you can take short positions in stocks now that are rolling over. We do not have to wait for the Index to top.

Here is Junk Bonds. True risk on is loaning money to shaky companies. Here we see a divergence of late between S&P and Junk. The junk investors seem to be getting nervous and have started pulling their funds.

Conclusion:

The evidence continues to mount for a reversal, as the Index rubber bands get more and more stretched.

You don't want to be caught over a weekend long a stock like AAPL when a bank fails or something goes wrong. Too much downside risk in ANY PARABOLIC shares, which now include the MAJOR INDEXES.

It is now much safer to go short, companies that have missed on earnings and whose charts are breaking down, verses being long parabolic markets.

Tim Kathlina

Before the Bell-S&P Timing Update Feb 11th



THIS MONTHS BARONS COVER DOW 15,000

 Q: Where are we at, and where are we going and for how long?

To get our compass correct, I have below a 3 year SPY chart, overlayed with Fib Time Zone analysis. Numbers tend to move in relative consistent time distances from their previous calculated number. This holds true in all the Universe.

Fibonacci Time Zones Defined:
A series of vertical lines that are spaced at the Fibonacci intervals of 1, 2, 3, 5, 8, 13, 21, 34, etc. The first line is placed at an extreme point on the chart and the lines that follow are spaced at increasingly wider intervals in accord with the Fibonacci sequence.

I began the Fib count in 2009 at what would be the completion of Elliott Wave 1. Fib count starts at 0.

Notice in 2009/2010 at intervals/weeks 2, 5, 8, 13, 21 brought in a low of some sort. After week 5 low, the market advanced 2 more weeks, before consolidating downward into week 8.
We can see this exact repeat in the 2011 sequence from week 5 to week 8.

In 2011, the exact high, was the exact FIB 21 WEEK. (COOL)

2009 Week 13 low, is the 4th wave in a 5 wave up pattern. Notice SPY pulled back 3-weeks into 2010 week 13, and the same repeat pattern into 2011 week 13. The FIB retrace however, was smaller in 2011. (This would be because of the month of November, setting up for Bull Christmas run)

Going forward to my current Fib count, since we have not reached week 13 yet, this implies and gives credence to my estimation noted last week, that we are in a complex wave 3, not working a wave 5 completion of trend. (THIS POINT IS VERY IMPORTANT)

THE REASON this point is SO important to understand is, the next move out of wave 4, will be UP into wave 5 completion and if FIB Intervals hold true, which I believe they will, this WAVE 5 move will be 21 WEEKS in length. (WHICH MEANS U DO NOT WANT TO BE SHORT FOR 21 WEEKS OF A MARKET ADVANCE OR YOUR PORTFOLIO WILL GET KILLED! YES I AM YELLING THIS POINT)

Last week, was down-week 1 is complete. If history repeats we have a move lower coming of 2-3 weeks, into Feb 24th or 1st of March, before embarking on 21 WEEKS OF A BULL RUN to complete the 5th wave and bring in the worst BEAR MARKET any of us have ever seen.

Q: How come you didn't begin this last count at the very top of the range, the last 21 ending day in June?

A: Because the Numbers don't line up to any significant turn points. But when I start from the secondary high in July, the FIB weeks line up.

Important--If my count is incorrect, this suggest we have completed week 13 and are working the 21 week leg. If that is the case, then week 13 completed around Christmas, thus week 21 would be in MAY!

I just cant see us rallying from here until may after already moving between 10-45% depending on the index or sector. So, I will stick with for now, we have begun wave 4 pull back; it will be fast and furious and complete quickly.

Q. What is the expected pull back price?

     A> Retrace minimum is 1/8th or .12. That gets us to 1193, around 1200.  Support one on weekly currently is calculated at 1090. I believe somewhere between these two figures. Because of time of year, the pullback can be more extreme.

Tim Kathlina

Before The Bell-SPY UPDATE FEB 9th

CNBC Feb 9th:
Bank of England Holds Rate, Boosts Quantitative Easing

Good News:
The VIX has moved higher last two days, despite the market moving higher. The massive increase in volume into this product and the higher move on up days at least shows traders are getting nervous.

SPY Timing:
We are 1 day past the 180 time cycle from August lows. (Still got my fingers crossed)
We move into the 135 time frame, from October low, the week of Feb 17-25th.
Next timing top opportunity will be week of March 9, or 90 days from December low.

SPY Price:
Noted on chart are SQ of 9 calculations from SPY 132. We are at the 1st resistance 135.07, lets see if that holds. (Cross Fingers)

Positions:
I currently am in TVIX and cash. New positions will be short side, such as PNRA presented on Twitter yesterday, or 1 day swing trades for longs.

Everything happens after the bell, thus I don't want big exposure to any high octane longs into the close. We are too high, too far, too fast; not worth the risk.

Tim Kathlina



AFTER THE BELL-SPY TIMING UPDATE FEB 7TH

On Jan 7th, I posted this chart of IBM and stated:
In a bull market, we would expect this pattern to fail; not so in a bear market. I expect the action/reaction dynamics to kick once the Head-n-Shoulders IBM pattern breaks the neckline. This will bring in a short trap, and give us the final S&P push to new highs for 2012. -Tim Kathlina Jan 7th

Today's IBM chart shows the H&S pattern was successfully denied, as we anticipated. Once the neckline was broken, the Washington plunge protection team went into overdrive to ward off the beginning of a broad market P3 sell off.

I indicated in Jan that IBM was the uber bull stock and the one to watch for signs of market exhaustion as a leading indicator. I posted this chart that divides IBM:SPY and noted a change from years past.

It appears that the successive QE programs have inflated the balloon, unlike 2009 and 2010, by the end of 2011, forming a distribution Diamond pattern. This pattern points to a long term top of some sort.

Today, the same IBM:SPY sub division confirms the BEAR DIAMOND; the pattern resolved lower. RSI has moved into a clear downtrend and MACD has a bear cross.

This is a long term OMINOUS SIGN for the broader index's.

Jan 28th I posted this SPY chart and stated:

If we take the weekly chart from bottom of Wave 1, to the top of Wave 3, its 31points. 5th waves tend to equal .61 of other waves. If we take the bottom of the 5 wave, add in 18 points we come to a price target of 133.

Next lets look at length of time. Counting from October low, we are coming into the 180 time frame from the low. The divisible numbers by 3 are strong point and time areas to look for tops and bottoms. So anytime between now and Feb 8th is a strong place for market turn.-Tim Kathlina Jan 28

Tomorrow is Feb 8th and the SPY closed at 134. So, we are correct on PRICE, will we be correct on TIME?????

If we are not correct, then here is the alternate evidence view points.

I. There has been no pickup in volume, in fact just the opposite. What does this suggest?

   A> The end of Wave 5s, volumes tend to rise sharply. This has not happened; suggesting that my above    counts for a truncated wave 5 are incorrect. This is why I have said, DO NOT BUY leverage Bear ETFs until the count is clear, other then VIX because of defined lows. (People get nervous the higher the market goes)

2. If this isn't a Truncated Wave 5, then what is the option 1 count and projection?

   A> The likely probability is we are in a Complex SUB DIVIDED Wave 3, with the top between 137.54 to 145. (I have noted the alternate count on the chart below)

   B> This probability is high as RSI<14> has not gotten overbought, (strange as that seems), and volume continues to move lower.

   C>When wave 3 is complete, expect a 38% Fib retract to symmetrical SPY 109.85 to complete Wave 4.





3. Option 2 count (Be prepared to be scared). This of course is low probability at this point, but here goes.

    A>Assuming perfect SYMMETRY between the 5 waves of the 2009-2010 move,

          then 2011-2012 math works out to be S&P 1700 for a top. OUCH!

Conclusion:

As I write this CHINA is down almost 2%, yet US futures are indicated slightly higher. Feb 8th is 180 time cycle, and our last top chance until end of the month. If tomorrow doesn't roll over, by Friday at most, then alternate counts noted above, which are SPY 137-145, have to be assumed.

The markets are no longer a function of price discovery based on historical measures, like debt/assets, price to earnings, etc, etc. T.V. pundits will justify any upside pricing the market provides using these measures; ie cook the books.

The fact is the markets are solely a function of liquidity; air in the balloon. The air is the velocity of money, printed out of thin air by Central Banks, backed by nothing, each representing additional debt slavery hoisted unto mankind for the sole purpose of servicing the Banking Oligarchy; of whom stated goals are of a New World Order and population reduction, otherwise known as Eugenics. (ala Hitler,Stalin,Obama)

Due to this money printing, and the belief by Keynesian traders that they have no systemic risk, STOCKS CAN GO MUCH HIGHER, BEFORE D-DAY.

The bubble will burst, just as Japan Nikki did, going from over 40,000, to under 9000, 20 years latter.

The best that we can do, is game the system as it is, NOT as we want it to be.

In other words, assuming S&P 1700, then you want to be long the most shorted, overvalued stocks you can find. (Thus our Brand Names that Got Killed Trade List) Because those are the shares that will get pushed to unreal highs by these banking elites.

Not because they believe the company story, because NOBODY else does and the Bankers have UNLIMITED CASH, at NO RISK TO THEM. They can squeeze the shorts until there is not one single one left.

Lets see what happens the rest of this week.

Tim Kathlina

AFTER THE BELL-S&P Update Jan 28th

From Yahoo Jan 27th:
Quest for the golden cross

By Rodrigo Campos

NEW YORK (Reuters) - January has turned out strong for equities with just two trading days to go. If you're afraid to miss the ride, there's still time to jump in. You just might want to wear a neck brace.

Bullish write ups like this are what tops are made of. The S&P is up 14% last 9 weeks. VectorVest universe of 8000 stocks now trades well north of 43xs P/E. (Very expensive)

On Dec 23rd SPY update, I reiterated my price targets set in early December by stating:

Conclusion: My forecast for 1290 to 1320, although many times in December looked improbable, remains. The forecast remains not because stocks should be going up, they should not be (Look at ORCL earnings miss, 1st in 10 years), the forecast remains because the technicals have not changed.

 

Lets look at where we are now

SPY weekly chart I have marked potential Elliott Wave counts. The 1st 5 waves up, followed by irregular a-b-c correction are easy.

 

The next 5 waves are yet to be determined, but this is the count I am going with for now, which has the SPY uptrend completion between the current close of Friday 133 and the 1st R1 area of 138.

The next two charts are to validate the above chart; indicating that the 5th wave is completed.

If we take on the weekly chart the bottom of Wave 1, to the top of Wave 3, its 31points. 5th waves tend to equal .61 of other waves. If we take the bottom of the 5 wave, add in 18 points we come to a price target of 133.

Lets take the daily chart to try and get a price target. The daily chart has an inverted head n shoulders pattern. Calculations for IHS patterns are head to neckline added to neckline. Using this formula, same price target of 133.

Next lets look at length of time. Counting from October low, we are coming into the 180 time frame from the low. The divisible numbers by 3 are strong point and time areas to look for tops and bottoms. So anytime between now and Feb 8th is a strong place for market turn.

Conclusion:

Current evidence of price and time, both on weekly and daily charts point to a 5th wave EW completion between Jan30th and Feb 8th.

Square of 9 calculations using Fridays closing price shows a GANN sell signal at SPY 129.39. A strong close below this price; coupled with increasing volume and within our 180 time frame; should seal the deal.

Until you see these numbers play out, taking down any high leveraged short ETFs other then ones tracing the $VIX is not advised. The reason we average into TVIX down here, AND ONLY TVIX, is because the $VIX tends to have defined lows, no matter how high the market goes.

Tim Kathlina



AFTER THE BELL-OIL TO $120, SPY, EURO/DOLLAR UPDATE JAN 11TH

ZeroHedge Jan 11th-Iran Interest Rates Raised To 20% To Fight Hyperinflation; Iran Nuclear Scientist Killed In Street Bomb Explosion.

Americans will not support an invasion of Iran without provocation by Iran. History is well documented that governments in order to achieve an objective will create circumstances, under the radar, to pressure an identified enemy to make the first attack.

As FDR did enticing Japan to attack Pearl Harbor, George Bush urging Saddam to attack Kuwait, Obama is now boxing Iran in to entice them to attack US interest. Nothing helps re-election like war; foreign and domestic: Oklahoma City-Bill Clinton, 911-George Bush, Iran-Obama.

Looking at Light Crude, the daily chart seems to have an Inverted Head-n-Shoulders pattern. IF this pattern breaks the neckline upward, then the calculated upside is between $110-$120. If this breaks the neck line based on Iran/US military encounter, sky is the limit. Either way, as of today, it seems the path of least resistance for OIL is HIGHER.

December thru many fund managers under the bus because the decoupling of the Euro from the S&P. Prior to December, fund managers could count on the currency to move lock step with the US index. The majority of fund managers missed the 1290 S&P upside that we called for due to this decoupling.

Looking at the Euro, the chart looks to be in a bear wave 3 on the daily chart. I project the ending of this 3 wave between $123-125. Generally a 3-wave, an impulse wave, will extend 61% of wave one.

Wave one was 12 points top to bottom. 1.61%x12 is 19. Subtract 19 from wave 2-top of 142, gives us a price target between $123-125. At this price, we will buy the Euro.

Here the dollar/spx in December began running together. Again, this shows the appetite for all things US. Money will always go where its treated best.

Conclusion: Inverted H-n-S pattern in oil, plus Obama desperate to win re-election, almost ensures escalation of Iran conflict towards war, and higher oil prices. (Nothing is ever a sure thing)

For now, money is flowing into all things American, its the lesser of two evils. The question is as everyone seems to be all in USA, will the EURO bottom as we project, money move out of US stocks/US dollar; moving into EURO, GOLD, OIL, SILVER, etc? Or will a rising tide float all boats, and everything goes higher on extreme bullishness? This we do not have an answer to yet.

So, we will go long the EURO at the calculated bottom, wait for the response by US equities. Our next TVIX insurance purchase is coming within days.

Tim Kathlina

After The Bell-S & P Update Using IBM as DIrectional Jan 7th

On twitter/tkathlinastocks Friday I noted:
SPY-Weekly formed White Opening Marubozu, created an upper shadow. SPY-Daily chart formed Bearish Harami Pattern. Monday pull back likely.

I don't like making daily calls based on candles due to low % accuracy, however, went out on a limb this time and below is the Daily chart showing the pattern.

Effective charting requires multiple looks at the same stock or etf, without getting analysis paralysis. It's prudent to compare the stock or etf you are charting against the most bullish stocks. One of the best winners, no matter bull or bear market, is IBM.

Here is IBM in candles, over layed with S&P 100 (black line), over last 6 months. Notice the double bottom in IBM August-September, followed by Inverted Head n Shoulder bottom $SPX. IBM, the most bullish of all stocks, leads the way for the broader index.

IBM 3-month chart shows a clear Head n Shoulders topping pattern. In a bull market, we would expect this pattern to fail; not so in a bear market.

Here is a BIG RED FLAG notice to bulls, showing the divergence of late between IBM and S&P.

Here we do a common charting technique by dividing IBM/SPY to dig even further under the hood for clues. This chart also has a 100 day EMA line included in red. This chart really brings the BIG PICTURE into focus.

Notice every time this division reaches the 100 EMA, its been buy time; both 2010 and 2011. However, notice in 2012, a massive Bear Diamond Distribution Pattern has formed, unlike years past.

Conclusion:  The stage is set for a WAVE 3 down to begin soon; given the extreme bullish sentiment and the most bullish of bull stocks IBM setting up for a breakdown. I expect the action/reaction dynamics to kick once the Head-n-Shoulders IBM pattern breaks the neckline. This will bring in a short trap, and give us the final S&P push to new highs for 2012.

Tim Kathlina

After The Bell-S&P Target Update Jan 4th

On Dec 16th I used pitchfork analysis to indicate pattern of trend for SPY and my low side price target of 1290.

On Dec 13th amidst much negative press I used Gann time analysis to indicate an upside minimum price target of 1290 to 1320 to be completed in January 2012.

On Dec 21st I used volume by price to show current overhead supply resistance and hypothesized that this would soon become support; restating my price target minimum of 1290 to 1320 to be completed in January 2012.

Today Jan 4th, a day that started lower again on negative news, ended up being very constructive for the bull case. The last two candlesticks have formed a Bullish Piercing Line Pattern. This pattern is defined as: 

Bullish Piercing Line Pattern is a bottom reversal pattern. A long black candlestick is followed by a gap lower during the next day while the market is in downtrend. The day ends up as a strong white candlestick, which closes more than halfway into the prior black candlestick’s real body.

Notice volume by price has now become a support area; as speculated on Dec 21st.

Using Square of 9 calculator expect SPY up side resistance at: 129.39, 132.35, if real bullish 135.14. These target areas will bring about the extreme bullishness required to put in a solid top.

Just for confirmation sake, I have included the DIA etf, which tracks the DOW JONES 30. DIA formed a Bullish Engulfing Pattern, which is defined as:

Bullish Engulfing Pattern is a pattern characterized by a large white real body engulfing a preceding small black real body, which appears during a downtrend. The white body does not necessarily engulf the shadows of the black body but totally engulfs the body itself. The Bullish Engulfing Pattern is an important bottom reversal signal.

Conclusion: Despite a very choppy and difficult Santa Claus December, filled with many fits and starts, my price targets remain the same. Even though the world wide data and news does not support the targets, and many times on big down days the targets looked in doubt, technically we did not get any signal to change our position.

Stock trading will always try and shake out both bull and bears with extreme fear and greed. It is very difficult to stick with a position as your resolve will be tested many times before getting paid.

Tim Kathlina

After The Bell-Before The Bell SPY Update Dec 23rd

On Dec 18th I identified the correct uptrend for the SPY using Pitchfork analysis. At the time, the market bears looked like they were going to give the bulls a knock out blow with no Santa Rally.

On Dec 13th I used price and time counting to project an upside target and date. At the time, again bearish news headlines ruled the day.

Today we are focused on a 1 month chart of SPY, to help support or deny my previous post. When forecasting, its important to check your list twice, use multiple time frames, multiple indicators and re-check often.

On this chart I included volume by price bars to the left side of the chart; we are concerned with the longest bar. Stock trading is about price discovery, where is the balance between buyers and sellers?

The longest bar is at the 124/125 level. In early December, this area of supply won the day moving the shares lower. Negative headlines, along with the 200 day moving average proved too firm of resistance for the bulls.

The question is: will supply overcome demand once again? Please do not under estimate the bulls ability to run the SPY up to my previous price targets, once able to move past an overhead supply area. What was resistance quickly becomes support when the area is broken to the upside.

OBV is trending higher. The strong move up starting Dec 14th.

The largest open interest for call contracts for January is 130, right around my price target - noted Dec 13th. Options expiration is too far out for this to be a factor; but stocks tend to gravitate towards option prices that make the contracts worthless.

Conclusion: My forecast for 1290 to 1320, although many times in December looked improbable, remains. The forecast remains not because stocks should be going up, they should not be (Look at ORCL earnings miss, 1st in 10 years), the forecast remains because the technicals have not changed.

Despite the rest of the worlds stock markets already in a bear, the USA extend and pretend continues on for just a little while longer.

This is not a recommendation to buy the SPY, just a forecast for a top. On the contrary, I would be running from bull positions as fast as possible. One bank failure and its all over.

I am averaging into TVIX.

Tim Kathlina