Tuesday, December 18, 2012

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The market is exhibiting wave three behaviour. If so, that would conclude wave two was very short. The initial 5 day and 7 day breadth thrust back on 11/16 signaled a new rally would have legs and that did not disappoint. Using the bullish labels, the 1423 high on 12/3 could have been the end of wave one but instead morphed into an Elliott expanded flat which is the most bullish of pullbacks. Then the 1438 high on 12/12 FOMC day also qualified as an end of wave one and expectation of a larger degree pullback was in the cards somewhere in the 1380 area. Instead the market turned around at the 1410 area. So somewhere a wave two needs to fit and given the current two day impulsive rally, the swing low at 1411 could be it. If the above chart label is correct, the old highs of 1474.51 will be taken out. The other bullish alternative is a wave extension. The bearish alternative  is a double zig zag pattern and that would imply much lower lows but we’ll keep that in the drawer for now. 

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From the Fibonacci point of view, the market is challenging the last Fib level at 1446. If the market were to reject the bull rally, this would be the place but seems doubtful at this point. If the S&P forms a bull flag between the 61.8% and 78.6% levels, the highs will likely be taken out. That is the top probability. Next in line is some formation of a trading range usually in the form of a triangle. Low on the totem pole odds is that the market crashes and burns. 

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Apple came up with a bullish engulfing pattern yesterday and gapped higher today. This is a bullish event and the DeMark setup could be put on hold with a close at/above 539 today or 529.69 tomorrow. 

25% long was kept overnight but it should be near 70-100%. There was one grand opportunity to press positions this morning and take advantage of this follow through day but regretfully passed on it. Chances are the portfolio will stay long 25% overnight. 

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2 Responses to Tuesday, December 18, 2012

  1. dave says:

    you have aapl running a 9 up demark setup count. on the 9th day, the count actually interrupted, so there is no actual 9 count…at least based on my understanding of the demark setup count. cheers. dave

    • Art says:

      If you are talking about the (9) in parenthesis, you are right. There was a bearish price flip right after the 8 count. When the Setup gets into the 8 count, the rules seem to be open for interpretation. In DeMark’s book, “New Market Timing Techniques”, he wrote that if a bar 9 high is not above the bar 6 high, then it most likely will occur in the next few days. In the same vein, Jason Perl’s book, “DeMark Indicators”, wrote that the bars of 8 or 9 must be greater than the highs of bars 6 or 7 to call the Setup complete. If that was not the case, then one should wait for the bar that exceeds the high of bars 6 or 7. Perl called that bar a perfected 9. I take a more aggressive stance in that as long as the high of bar 8 is above the highs of bars 6 or 7, then that would satisfy the bare minimum of the Setup with the thought that an actual bar 9 or a perfected 9 may occur. In Apple’s case, a perfected 9 did occur

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