New Video Available and Stock Selection Service Enrollment

I have recorded a new video this weekend updating members of my mailing list on the current market position.  I also have begun a stock selection service based on my Integrative Harmonic Trading methodology.  And I am opening a discounted enrollment period for that service through the first week of January.  I will do that from time to time dependent upon market conditions.  In the current case, I think the service will provide outstanding value to subscribers over the near term.

CLICK HERE TO WATCH THE NEW VIDEO

The methodology integrates general market timing and analysis (some of which I frequently detail in this blog) along with what I believe is that best harmonic pattern identification method available.  But because the timing of low risk and high reward trade entries will be dependent on market turning points to a large extent, there may be periods of weeks or months were the most ideal opportunities have passed or are yet well ahead of us.

So if I was a new subscriber to a service, I would want some good opportunities right off the bat.  And that is what I intend to achieve with opening discounted enrollment periods at times when I expect the market conditions to be offering an abundance of good opportunities.

If you would like to receive future notice of discounted enrollment periods and occasional additional market updates, then you can put your name and email in the form on the right side of this page.

With that I wish you all a safe and happy New Year!  It's always an exciting and hopeful time (I think anyway). 

I will be traveling for a couple weeks and video updates may be sparse, but I will still post charts and analysis as appropriate.

All the best,

Pete

CLICK HERE TO WATCH THE NEW VIDEO

Early 2013 Stock Market Forecast

Click on Chart to Enlarge

Near Term 2013 Stock Market Forecast

The chart above is XLB which is the materials sector ETF.  I have chosen to use this chart rather than one of the major market averages because the pattern looks more clear and looks similar to the summer of 2011 topping pattern, so I may draw an analogy to a price pattern that I forecast at that time.

Several country ETF's and commodity intensive sector ETF's (energy, materials) appear to be completing an upward flat pattern that began in early September.  The ideal time expected time for wave C of the upward flat pattern is completing today, but may extend until about Jan 7th.  Ideally when wave B takes much longer than wave A (as in this case), the C wave will take about half as long as A + B.  If it takes .618 as long, that would project a high of Jan 7th.

The shorter term price action and technical analysis suggests that there may be another push to at least slight new highs for this rally off the November low.  That could create an ideal bearish divergence on the daily time frame.  Given the relatively consistent seasonal tendency for price gains around Christmas to New Year's, that would seem likely.  Also it would be common for the end of C to push above the dashed parallel channel line on the chart between A and C.

 Now most pattern analysis is very subjective, but imposing logical rules upon the pattern and post pattern price action can bring pattern analysis toward a useful/objective form of analysis.

In this case of the current flat pattern there are specific requirements of price action to confirm that the pattern I am suggesting actually did/is taking place.

1. The first requirement after a possible high completes will be for the wave C trendline to be broken in less time than wave "v" of C took to form. (not yet clearly identifiable on chart)
2. Then the entire wave C move must be retraced in less time than it took to form.  So this would suggest prices below the November low in roughly 2 months after the expected high.
3. Then for further confirmation, the X-B trendline (in dashed blue) should be broken in less time than wave C took to form. Since that trendline is downsloping, it implies considerable weakness ahead at this point.

 So while I don't know whether this is occurring, the pattern is reasonable and the expected move will be extremely large and fast. I would strongly suggest any long trading positions have a moderate to tight GTC stop in place at this point.

If this pattern plays out as suggested, February or March 2013 put options could stand to make considerable profit.  Ideally a put purchase could be made on an hourly chart MACD cross to the downside after prices potentially push to a new rally high over the next several days.

The obvious support under the market is in the area of the June 2012 and Nov 2011 lows.  I would anticipate price moving to that region before attempting a rally.  However, a typical leg down in a bear market, if that is what is to come, is on the order of 4-5 months before a 1 month low to high correction.  So on that account, we may be set for much lower prices into roughly June of 2013 before a major rally attempt.

This following posts are taken from the final move up in 2011 as a very similar pattern completed and in July 2011 I forecast a large move down in stocks based on the pattern.  You can read those for further understanding of the current pattern possibilities.  In the current pattern, the break of the Sept 2012 low is analogous to the break of the April 2011 low in those posts.  It implies that it is unlikely for price to make a new high above the Sept 2012 high, but will likely come close.

http://stockmarketalchemy.blogspot.com/2011/04/possible-pattern-completion.html

http://stockmarketalchemy.blogspot.com/2011/05/spy-short-term-oversold-at-gap-support.html

http://stockmarketalchemy.blogspot.com/2011/07/possible-completion-of-flat-pattern.html

Additionally I will refer back to a recent long term outlook post I made.  It appears as though the second scenario in that general outlook is coming into play.

Some outstanding short selling opportunities are setting up and nearly ready to trigger at this point in a number of individual stocks.  I have made a new free video update available to members on my mailing list detailing some of those.  You can access that by clicking on the link in this paragraph or by filling out the form on the right side of this page.

2013 Stock Market Forecast Video 

This video covers further technical analysis details and set-ups to watch for over the coming days or weeks as well as "smart money" analysis of the CoT report.

Technical Analysis and CoT Review

How to Use Fibonacci Retracements in Harmonic Trading

How to Use Fibonacci Retracements in Harmonic Trading

I have recently created an intensive and integrative trading course detailing my personally developed and researched harmonic trading method for trading individual stocks.  The course content is much different than the content on this blog.  If you want to learn a way to trade stocks for big gains that can be used for trading or investment purposes in every market cycle, then please consider taking this course.  I promise it's great stuff and I give you a 100% satisfaction guarantee or your money back.  It can be used on any time frame, but is most applicable to a daily or weekly time frame in order to integrate all the principles together as shown for maximum winning percentage and profit potential.

I'll have a new time sensitive video going out this week special for members on that list.

If you would like to read more about this harmonic trading course click on this link.

If you would like more information on some basics of the method to use right away in your trading, then fill out the form to the right of this page and follow through with the links or click on this link to my stock market forecasting mini course and fill out the form there.

The video above gives a brief introduction on how to look at Fibonacci retracements in context of harmonic trading patterns.

Fibonacci Retracement Video Highlights 

Fibonacci retracements can be used in conjunction with harmonic pattern identification in order to predict in advance the most likely price reversal zone for a stock.

I use extensive fibonacci inter-relations in my harmonic trading course in order to create one of several "layers" of probability backing my trade.

This video shows a basic three retracement approach applied to ABC patterns that are smaller than a prior move up.  Overlapping of the Fibonacci retracements in a small price region suggest harmonic proportion in the price chart, and this is the type of relationship you want to see in harmonic trading candidates.

Watch the video, and hopefully it will help you in your trading.

-Pete

Stochastics Bearish Divergence

Stochastics Bearish Divergence on the Stock Indexes Daily Time Frame

Click on Chart to Enlarge

The chart above is DIA which is the Dow 30 ETF.  It formed a bearish engulfing pattern today which is a bearish top reversal candlestick.  The reversal took place at a 78.6% fibonacci retracement of the move down since September, and there is a classic bearish divergence on the stochastics study under the chart.

Based on the multiple time frame momentum set-up and the price pattern, I am expecting a high to occur soon.  So this could possibly be a very significant high.  The ideal time frame for a high is not until next week from my perspective, but that could be a little anal retentive.

If the stochastics or MACD turns into a sell signal soon, it could be a very profitable signal from my perspective.  

I will update in detail in an upcoming post.

Pullback Expected - Unfilled Gaps are the Short Term Target

Click on Chart to Enlarge

This chart is IWM.  It formed a bearish engulfing pattern yesterday with the daily RSI near 70 and right at the large gap down level from mid October.  Notice that the stochastic study has a mild bearish divergence and is now opening up into a sell signal.  If yesterday's low is broken that will trigger a trailing 1 bar low sell signal.

Given the larger context here, I think that could offer a nice very short-term trade.  The blue arrows on the chart represent unfilled gap downs that are likely to attract prices on pullbacks.  I think there is a high probability that the closest unfilled gap down gets filled pretty quickly if yesterday's low is broken.  Then if the market closes below that gap level, it will likely move down to fill the next unfilled gap up as well before possibly moving higher.

If you watched my video yesterday, then you should know that we are approaching a potential upward pattern completion point.  Because of that, I would suggest to be more inclined to take short trades on appropriate signals rather than longs, even though the traditional Santa Clause rally is due.

In 2007-2008 the market experienced a muted rally until around Christmas, but as soon as the holiday trade was done, the selling became aggressive.  So basically if we don't see a good Santa Clause rally, that may be indication of implied future market weakness in that the most consistently seasonally strong period couldn't rally the market much.

Stock Market Update 12-12-12

Stock Market Update 12-12-12

This video provides a stock market update covering US markets and ETF's as well as foreign market ETF's.  The current upward pattern may have a completion and topping time frame around the Christmas holiday.  Several sectors of the US stock market and world market ETF's are pushing to new highs since the Oct 2011 low, though some are lagging well behind and may be ideal candidates for short opportunities in coming weeks.

Bearish Engulfing Pattern

Click on Chart to Enlarge

The SPY etf formed a bearish engulfing pattern Monday after filling the post election gap down and touching the 50 day moving average.  This may be program selling and initial profit taking on this move up, but suggests a multi day pullback should be expected.  Given the lower volume on the day, it may be weak program selling, and a push to new highs above Monday's highs, would like lead to some follow through to the upside.

In the larger context this could be the peak of a somewhat typical backtest of the broken Oct 2011-June 2012 trend line.  From my research and data on harmonic trading pattern analysis, the most common candlestick pattern that shows up on backtests of broken trendlines after completed successful bearish harmonic patterns, is a bearish engulfing pattern.  Again, the back test often peaks in the region where the trendline break took place on the chart, or at a fill of a gap down that broke the trendline.  Both are applicable here as well, though this pattern in the market averages is not the type of pattern my research specifically quantifies.

Additionally this bearish engulfing pattern is occurring as the RSI has approached 60 which is often the rough upper boundary for RSI in a downtrend.

On the weekly time frame the set-up has developed nicely for a dual time frame indicator short sale set-up.  The weekly MACD on the indexes is still in a sell configuration and this little rally has given the opportunity for a bearish cross on the daily MACD to possibly continue a primary downtrend.  The indicator set-up will be one to follow the next couple weeks.

You can learn more about the bearish engulfing pattern at this link.