ES Journal Archive (2011)

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For you long term swingers (such as the owner of this thread), here's some longer term analysis from Alexander Elder's newsletter. On 9/27 the newsletter described a powerful indicator setting up a long term buying opportunity.

Here's the newsletter excerpt:

NH - NL Index Lights the Way

On May 11 we sent out Books & Trades headlined “Approaching a big turn?” That letter showed several charts (including the New High – New Low Index) which identified the stock market top and prompted us to call for a serious downside reversal. On June 10, Books & Trades updated those charts and showed how they set a downside target below 11,300 for the Dow. On August 16 we held a webinar (you can view the recording free at http://www.elder.com/webinars/), analyzing the decline.

Our target for the decline has been reached and slightly exceeded. Now let us take a look at the message of the current chart:

[Sorry I can't post the chart]

As longer-term readers know, I consider NH-NL the best leading indicator of the stock market. This weekly chart of the S&P shows a severe bearish divergence of NH-NL (red arrow), which gave a strong sell signal. Now, near to the right edge of the chart, we see the strongest buy signal that the weekly NH-NL can give – a Spike signal. Our traders’ group is named after this signal, which occurs when the weekly NH-NL dips below minus 4,000 and then closes above that level. It marks the terminal splash of panic which cleans out weak holders and wipes the slate clean for a new rise. Notice that the previous Spike occurred in March 2009, at the start of this bull market.

Does this mean that we’ve seen the low of the decline? Not necessarily so. We have seen the point of the maximum power of bears, but it may take several months for this bearish inertia to dissipate and let the bulls to take over. It would not surprise me to see the August low getting taken out before the bull market resumes.

[This occurred on 10/4]

The latest bottom of NH-NL, just above the minus 4,000 line at the right edge of the chart, seems too deep for an immediate upside reversal. I continue to monitor the bottom being built, while drafting my shopping list in preparation for a good buying opportunity.
 
Wearing white. And on conviction I stayed out of the market. The only indication of strength for bulls was a close above the 4 hour average yesterday at 1208.75 on scant volume that was quickly met with decreasing volume on heavy sell stops; the first real sign of strength for bears since bottom-fishing expedition after the bear rally and slow-down of 2008. And a two day stall at a GARCH spread at 1222 last week. So I still contend this was a stop run for new lows. To where, though? I have a few guesses.
 
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