Natural Gas Looking Super Bullish

I think natural gas is getting ready for a nice bounce over the next few weeks/months. I think UNG (nat gas ETF) could retrace up to $41-45.

It looks like a 3-wave decline has unfolded from the July peak. Price has carved out a brutal and extended correction with few bounces. However, notice that WaveC formed as an ending diagonal. Volume has been dropping throughout WaveC and MACD is showing strong positive divergence.

Also, COT data shows that commercial traders are extremely long natural gas. See this link for a COT chart (select "Natural Gas", "Commercial Hedger", and "Two Years" in the drop down menus). They are more net-long than they were last winter when price started it's strong spring rally.

There could be one more low, but I think if price rallies above the upper descending trendline, it will head up to $41 or even $45.

The Bear Market has Ended ... or has it?

Many bloggers have proclaimed that today's rally is the start of a multi-month bear market rally. Just like the 10/13 rally, this may be too obvious a sign for the bear market's end. I think that there is a better than even chance for the market to register one more trend low before the real rally starts. If the market opens and stays below today's high, I think this scenario is possible.

Notice that price has been carving out a long and painful ending diagonal formation. These are so annoying because prices stay at depressed levels for an extended period of time and trend slightly downwards, providing no relief. An ending diagonal is composed of 5 waves, 4 of which have completed thus far. A 5th wave drop that undercuts today's low (and possibly the 10/10/08 low) would complete the pattern and lead to an explosive, unrelenting rally to 1050 and higher. Today's rally washed out the bears. One final decline would washout the remaining bulls, and undercutting the 10/10/08 low would respark the "crash" fears.

However, there is also some good evidence for this rally sticking. Notice that there have been 3 high accumulation days (higher volume up days) and only 2 distribution days since 10/10. This is pretty constructive. Also, see the following chart:

This 1h chart of SPX shows that the rally from 839.80 could be counted in 5-waves, and the decline is clearly in 3-waves. Also, price is breaking above the downtrend line. Thus, if the market gaps up, it would likely confirm that the bear market is done for now. A good re-entry point would be the topside of that trendline.

In summary, I favor the possibility of one last washout decline to complete the elliot wave pattern. However, a gap up would reduce the possibility of this scenario.

Trade # 29: EUR/JPY Long (Update)

Stopped out for -685 pips total (counting both entries). All I can say is WOW.

Trade # 29: EUR/JPY Long

I am going long EUR/JPY @ 122.50 and 120.15, stop @ 117.90. My target will be 127 and up. If both entries get filled, I will close one around 127 and the the other run for longer term.

Notice that only 4 waves have completed from the 141.73 top. I think one more down wave is necessary to complete this downtrend. Completing this wave would also finish a larger 5-wave downtrend from 169.96. One more low is necessary to washout the last bit of longs before a rally. This would also create divergences on the oscillators.

I am not sure where Wave-v will end, so I am placing two entries in between the range which I expect will contain price. There is a HUGE confluence of support at 118-120:

• 119.60-70: 61.8% fib of the move from 88.94-->169.96
• 119.60-119.80: previous resistance highs
• 118.41: Wave5 =Wave1 (Wave1 is 169.96-->147.01, Wave5 is 141.73-->now)
• 118.16: Wave5 = .618*(Wave1-->3)
• 122.15: Wave-v = .618*Wave-i
• 118.83: Wave-v = Wave-i
  

Possible Head and Shoulders on VXN (Update)

Shaping up pretty nicely!

Possible Head and Shoulders on VXN

If the market can stage a rally after today's panic selloff near the end of the day, VXN (Nasdaq Volatility Index) should drop and near completion of a head and shoulders topping pattern. This would imply that the past weeks of fear could soon be near an end.

Trade # 28: EUR/JPY Short (Update)

I am out @ 131.15 for +335 pips profit. It would have been nice to have both my positions filled last night, as I would have left the other half to run. Oh well, I won't be greedy.

Trade # 28: EUR/JPY Short (Update)

I got filled on my secondary order @ 134.50. I moved the stop to 135.00. My target is 131.15

Trade # 28: EUR/JPY Short

I am going short EUR/JPY @ 136.90, stop @ 139.10. I will also have a secondary order to short @ 134.50. My target is below 132.

I would like to believe that price made a bottom on Oct. 10th, but the Wave pattern is indicating otherwise. There was a 3-wave rally from 132.26 to 141.73. Then price dropped in what looks to be a trucated 5-wave rally. Over the past few days, a choppy upward consolidation was carved out, and finally, price is starting to break down again. I will try to go short as price temporarily corrects upwards.

There is significant resistance at 137, and I will short in that region:

• Wave-a highs
• 61.8% fib of the drop from 138.55-->134.89
• Weekly pivot point
• Channel resistance

My stop is above the labeled Wave2 high.

Trade # 27: USD/JPY Long (Update)

I am out for -51 pips. Looks like the whole rally is in 3-waves and price is ready to drop again.

Trade # 27: USD/JPY Long

I am taking a quick long trade @ 101.86, stop @ 101.35. My target is 103.75.

On the 1h chart above, you can see that price has formed a mini Cup & Handle pattern, and is breaking above this level. It is also breaking above the first resistance trendline. I think a double-zigzag is forming from the Oct. 10th low, so I will sell if price gets to the next resistance trendline, around 103.75.

Trade # 26: EUR/JPY Long (Update)

I am out for +180 pips profit @ 135.20. I don't like the fact that price rallied in a pretty distinct 3-wave pattern. I may be closing out prematurely, especially given that retail traders are finally going short USD/JPY, but at this point, I am happy with my recent gains. I will try not be greedy.

Trade # 26: EUR/JPY Long

I am long EUR/JPY from 133.40, stop @ 129.50. I think the correction from 141.73 should be nearly over. My target is above 141.73. I will trail my stop as the trade progresses.

Notice the 3-wave correction that has thus-far ensued. WaveC is roughly equal to WaveA, and price was supported by the 78.6% fibo. As long as price stays above 133.35, a new uptrend should have started. I noticed that the SPX dropped on lower volume today, so hopefully it is just retesting the low and will now bounce upwards. This would support the EUR/JPY pair.

I also noticed that retail short interest for USD/JPY increased as the pair dropped, which means that perhaps retails are beginning to switch to the obvious downtrend. This is bullish for USD/JPY and thus EUR/JPY.

Trade # 25: EUR/JPY Long (Update)

I am out for +750 pips @ 140.50. I am jumping the gun a bit, but this is a nice profit. I will look to get back in long on a deeper correction.

Wave3 of 5 has finished, and I sold halfway through the Wave4 correction. There could be one last rally for Wave5, and then a decent downwards correction. I will try to buy this correction.

Trade # 25: EUR/JPY Long

I am long EUR/JPY from 133.00. My target is 141.50 or higher. My stop is currently at 136.00.

The ending diagonal scenario unfolded nicely and price has now started to trend upwards, breaking the bounds of the ending diagonal. This should portend a strong upmove, and stronger equity markets should support the currency pair as well. It looks like a series of 1st and 2nd waves has formed thus far, so I would expect the Wave-ii of WaveII at 136 to hold. I will continue to trail my stop as the trade unfolds in my favor.

Trade # 22: EUR/GBP Short (Update)

I am out @ .7965 for -25 pips. It looks like the uptrend is ongoing as the recent price weakness was in 3-waves. I may actually look to go long, but for now I am on the sidelines.

Trade # 24: EUR/JPY Long (Update)

I am out for +60. The EUR/JPY looks like it could be forming an ending diagonal so I will watch from the sidelines until the pattern clears up.

Trade # 24: EUR/JPY Long (Update)

I last posted about this trade here. I am long from the 134.10 zone, and I haved moved my stop up to 134.80. I will continue to trail my stop as the trade goes in my favor.

Notice that price is carving out a bottom as MACD and RSI both show postive divergence. The rally from 134.14 was retraced in 3-waves, but did not make a new low. Now price is rallying again, breaking the downtrend line. I am moving my stop to below the Wave2 low at 134.80. If the stock market picks up, the EUR/JPY should rally strongly from it's oversold state.

Trade # 24: EUR/JPY Long

I am going long EUR/JPY @ 134.10 with a stop @ 129.80. My target is 141.50, or maybe higher, depending on the structure of the ensuing rally.

I think the stock market could bounce near term, which should support the EUR/JPY. It has had a major selloff since it peaked at 170, but thus far, it has occured in 3-waves. I will try to call a bottom around 134 as there is a confluence of strong support in this region:

• 133.95: 78.6% fibo
• 133.87: WaveC=WaveA
• 133.80: trendline support

My stop will be below the Wave2 low around 130.

SPX Update

I last posted about the overall market here. The SPX was around 1190 then, and I've been paying the price of trying to call a bottom. Now it is around 1000, but the rubber band is getting a bit too stretched, so I think it is appropriate to expect a decent rally at this point.

Notice the lowest study on the 15y weekly chart of SPX (above). It shows how far the current price is from the 4wk moving average. At today's close, the market is further away from the 4wma than it was at the worst of the 2000-2002 bear market. As Will Rahal pointed out, a regression to the mean would seem likely at this point.

No one is bullish anymore. With all the expected support levels broken (1060, etc.), it is hard not to be bearish. I think (and hope) that this will support a rally.

CNEH Update

I last posted about CNEH here. Since then, price rallied nicely, but then fell back to make a new trend low. I think price is near a short term bottom and could soon rally back up to $3.20-$4.20.

Notice that 5-waves have formed from the $5.68 top. The indicates that we should see an upward correction at this point followed by another trend low in the next few months. Right now, MACD divergence has formed, but is not yet confirmed. My plan is to sell a decent portion of my holdings on the anticipated rally. I would imagine it could rally to the 38.2% or 61.8% fibs around $3.20-$4.20.

Trade # 23: GBP/JPY Long (Update)

I last posted about this trade here. I was stopped out today for -310 pips. Making a new low indicates that my original premise for going long had been proven wrong, so I will wait for a clearer setup.

CANSLIM: TISI

Team, Inc. (TISI), an oil and gas servicing company, is looking ready to break out. It is a CANSLIM winner, meeting the criteria as determined by stock guru William O'Neil. I will look to go long TISI on a close above $40.55 on volume 25-50% higher than average.

Fundamentally, TISI is strong, as it meets the rigid CANSLIM criteria. It is also forming a decent Cup & Handle base that should lead to much higher prices as the overall market bottoms. Notice that, generally speaking, volume shrunk into the bottom of the cup. Volume then began to increase as price recovered, forming the right side of the cup. Price has made a slightly higher high, which is not ideal. However, most recently, the volume has dried up as the handle wedges downward.

The safest way to trade this is to wait for a follow-through day in the overall market (+1.7% on higher volume), followed by a close for TISI above $40.55 on much higher volume. My stop will be 7-10% lower, and my initial target will be $48-50.