SPY TECHNICAL VIEW JUNE 7TH

This 1st SPY chart considers the possibility of a 1st wave EW1 completion.

Noted in my last post, the overlap and sub wave numbers do line up for this probability. My concern for this is the FAST move back towards the 50% retrace level. This is day 3 and markets have already retraced 38% of the 5 sub waves.

Any trend allows for one to four day counter trends; even up to seven days. Therefore, the market is still within this allowable range, yet has already retraced a distance that a normal second wave would take at least two weeks to a month to complete.

In other words, what I am saying is the time and distance doesn't sit well with me to validate this count.

Short term traders use RSI<2>, overbought above 90, oversold below 5, for potential early warning of turns.

This fast move, within the 4 day counter trend allowable time frame, already overbought at 90 on RSI<2>, and reaching close to 50% retrace; feels more like a fast counter trend and not a completion of EW1, moving into EW2.

Next SPY chart I have noted a trend channel, with RSI<2> +90 tops and <5 lows. Since EW is conflicting at this point, lets stick with this trend channel until proven otherwise-leaving off any EW counts.

If this market can get past 7 days and take out 61% of the decline, this is not a bear market.

Tim Kathlina

S&P TIMING UPDATE JUNE 6TH

Yesterday the markets got CNBS to call for complete bail out of Europe and a leading FED official to call for massive stimulus accommodations.

No surprise this morning, despite back tracking from other FED officials and the ECB doing nothing, futures risk-on is still in play.

The question: Have we reached EW1 bottom?

EW suggest that sub wave five can or will equal sub wave one-as one clue. Looking at SPY we can see wave i was 7 points, and wave five has moved down 7 points to the 200 day moving average.

We have to assume it is possible that WAVE 1 has been completed.

In May, I posted this KAGI chart of the 2008 SPY bear move; suggesting that this is the road map that we should consider.

In 2008, a Presidential election year and the last bear market, the markets topped in May, and moved lower into ending WAVE 1-end of June, first of July. 

Fibonacci sequence noted on the next SPY chart, suggest the 2008 scenario is still in play.

Starting at the top, day zero, the 8th day completed sub 2, the 13th day completed sub three.

The next FIB sequence is 21 days, which counts out to June 19th. Per FIB theory, SPY trend change wont be until the next FIB ending date of June 19th; 21 days past the last FIB ending time, 13 days.

Conclusion:

EW theory allows for completion of EW1 when sub one equaled to sub five.

The 2008 bear road map and FIB number sequence suggest EW1 completion sometime around June 19th or early July; this is still our preferred scenario.

Tim Kathlina

THE FED VERSES THE MARKETS-CHART REVEWS JUNE 5TH

The question: Will there be QE3?

The answer to this, maybe can be determined by looking at Mitt- New World Order - Romney's, top campaign donors list. Shocking I know-but we can see EVERY BIG NWO Bank that the FED ANSWERS TO is backing Romney.

Did the FED pump up asset prices long enough for their BANK buddies to get out of their long positions and get short the world markets for the coming implosion?

I believe the answer is yes. I also believe in order for Romney to win; they don't want the DOW up 200 points everyday.

Now lets quickly run thru some charts. What will be obviously clear-MARKETS downward slope pressure on assets-verses FED induced rising true trend lines.

The MARKETS will win this game-not the BANKS.

DIG-Note the downward slope of the 200 day weekly, verses the higher lows induced by the FED. These two forces are quickly getting close to a major battle-THE MARKETS WILL WIN.

MDY-S&P mid caps, more American revenue based companies. Here I have a FIB retrace fan that spans the QE, QE Lite, and Twist programs.

Despite the Trillions of DEBT created by the FED-slowly one by one, the FAN lines of support are being removed.

SCO-Most my focus is on ENERGY related ETF's because ENERGY is the one true WORLD product that despite race, color, religion-we all use, rich or poor. (Sorry Apple)

SCO is the short energy product. The FED pulls their tricks, this ETF rolls over and goes down. Notice how this year is a much different technical picture from last year.

Last year, SCO was stopped cold by the 50 day, struggled to get above it, then rolled over; because of anticipated FED action.

This year, the MARKET FORCES blew SCO right past the 50d just as if it wasn't even there. WHY? Could the MARKET anticipate no QE3?

Part of the FED un-stated mandate is to suppport S&P multinationals earnings power by crushing the US Dollar.

This serves a few purposes: allows the continued export of JOB's to cheap labor Foreign lands-which then artificially supports Company profits thru repatriation of Foreign dollars to US dollars.

Gone are the Henry Ford ideas of putting Americans to work making the companies products; paying workers a living wage so they can afford to buy the companies products.

The US Dollar, or the UUP shows two patterns: A FED induced Head N Shoulders pattern, which has played out, and a MARKET induced Inverted Head N Shoulders Pattern, which is now in play.

As the dollar rises-WALL ST screams for more QE. Why? 

A rising dollar means lower profits as all these hit and quit it Company CEOs have staked their fortunes on Free Trade Agreements, SLAVE CHEAP LABOR, and REPATRIATION of money.

UYM-Another Energy play, same story. Downward 200 day slope, Head N Shoulder pattern--all despite FED action over last 3 years.

Conclusion:

Wall St. power elite and the FED are in direct opposition to MARKET natural forces.

Every week, money flows out of the stock market and into other investments that are not worthless paper. Currently their are 23 million people on Food Stamps, 100 million people NOT IN THE LABOR force and the biggest tax base is the baby boomers; putting their money under a mattress.

Extend and Pretend has an end and it is coming soon.  

Tim Kathlina

S&P IV RETRACE LEVELS

After completing Wave 5 of the bull run; SPY has now worked out 3 minor waves of WAVE 1 in the new bear trend.

This chart shows the true trend line of the bull wave; and calculated FIB pivots.

One of these areas should be the end of minor IV bear, before we move to minor 5 low to complete this first bear wave; sometime late June or early July.

Tim Kathlina



CHARTING THE RUSELL 2000 IWM

Here is stats on Google trends for search words: "Bank Run". The words are being searched at an all time pace; this might be insight into actual investor concerns not yet reflected in risk investments such as stocks.

IWM is ETF for Russell 2000.

The chart is showing an EVE-EVE double top; this is two rounded top patterns. The previous year, June was a good month, beginning at the Bullish DOJI marked June 2011.

Today the weekly chart has a Bullish Harami pattern. The question is will June repeat 2011? In my previous post, I indicated we might do better to compare now with the last bear year-presidential election year 2008 and not the previous bull year 2011.

Drilling down further using volume by price-clearly most investors over the last 30 days are in the Russell at $79, thus UNDERWATER. Depending on how the news cycle goes the next few days; this VWAP could prove to be too much resistance for bulls to overcome. Or, with a few carefully placed news releases, this could fire up the algos to push stocks up to a lower high, sames as June 2011.

The put/call ratio shows no nervous bulls as of yet, even though the VWAP shows they are mostly underwater.

The blue line represents the p/c ratio, the red line is the price of IWM. IWM doesn't bottom, until the blue line, p/c ratio, gets above 4.0. As you can see, even though bulls are under water and May was a bad month for them, the put call ratio barely budged-showing complete complacency.

Conclusion:

The p/c ratio and $79 VWAP seem to suggest IWM has further down to go before EW1 can be reached.

If we are using 2008 as a road map, then we can expect to reach the 1st leg bottom sometime late June or early July.

Coordinated Central Bank news would change the technical dynamics in the short run.

Tim Kathlina

SPY TIMING UPDATE MAY 19TH

Often in times past, market tops can be marked and remembered by events that pointed to good times as "far as the eye can see". Was FaceBook IPO one of those times?




On May 1st I posted this SPY chart and indicated that we were in Wave 4, and that conditions have been met to complete the wave. The chart had FIB upside targets for Wave 5.

Finally, after what seems a life time, we can now count a solid 5 wave completion of the bull run. Typically bull runs last 2-3 years, bear runs last 1.5 years.

All the talk now is when is the bounce, where is the tradable bottom? The answer is: nobody knows for sure.

What I want to focus on is a different question: where is WAVE 1 likely to complete? Lets not look at tradable sub-wave bottoms within WAVE 1.

The point is, if we bounce anytime soon-should we cover our short or add to that short; sell short the bounce? We have to keep the concept in context. It's not important at what price the SPY bounces; IF THE BOUNCE IS A SUB WAVE, WITH FURTHER DOWNSIDE TO GO TO COMPLETE THE MAIN WAVE 1.

To look at this properly, the next chart is a Kagi 2% chart of the last bear market year, the 2008 Presidential election year.

 Lets use apples to apples comparison years; 2008 bear-2012 bear, for a road map of dates and/or probable weeks of tops and bottoms of the MAIN WAVES, in order to maximize our profits.

In 2008, Wave 1 down started in May, and completed in July around option expire week. This is based on 2% moves in the index that trigger the black buy Kagi or the red sell Kagi. All the noise/sub waves in between are removed from the chart.

Our strategy-is to pile on to shorts, with every bounce in the market, all the way into July. In July, we apply a % trail stop that moves with the stock, raising our stop price as the short moves further into profit, until we finally get stopped out.

Just follow the blueprint from here; begin shorting option expire week of August, all the way into the Presidential election; cover for Santa Rally, short Jan 2013 for the final 5th wave.

Could a coordinated FED action put a wrench in this plan; sure. But we can deal with that if and when it happens. I believe the FED will not embark on QE3-4 months prior to a Presidential election; just as they took no action in 2008.

Tim Kathlina

WHY I LOVE THE VOLATILITY INDEXS

Here is a chart of the XIV, which is the inverse of the VIX.

Stock markets take the long way around to a final destination, always. We can see in the XIV chart, despite countless Europe interventions, Fed speak, and trillions of dollars spent-XIV has managed to simply make a lower high, confirming the overall larger picture, which is a confirmed bear downtrend.

I have marked the change of direction DOJI candle, confirmed by the long reversal candle the following week.

Continue to build positions in VIX trading products such as TVIX; take advantage of what will be a long slow bleed of Americans 401k retirements, and the ensuing panic that is sure to set in.

Tim Kathlina