Have no bias when first watching, and see how fast that changes as they make every segment seem that we are in a terrible state of affairs. If this were the case, price action would be the leading indicator and tell us if we were headed in such a direction. Like I previously stated, the NYSE Index is up 30% off the October 2011 lows. Nowhere near a dark place! What I am getting at here is to shut the media off from your trading/investing research and see what a difference it makes. Let the fiscal cliff talk disappear all together and let the price action lead the way. So, the next time you want to read one of those articles and think to yourself that we are in a dark place, do yourself a favor and look at a yearly chart of the NYSE, S&P, DOW and ask yourself, is that bearish? Lets check out that ‘bearish’ chart which is off of the 2009 lows. We have 3 waves up, with the 4th wave just completing on the latest decline in the markets. I have the larger picture labeled in the lime green numbers. As you can see, the chart shows I am expecting us to go up from here in a 5th wave. I have the sub waves of the 5th wave labeled in the white count. Wave 1 completed on August 14th and wave 2 on November 16th. This leaves us currently in a (iii) of 5, a complete melt up in the markets.
When analyzing the market, you need to check out what the VIX Index is telling us, and where it may want to go. It’s also called the ‘fear gauge’ of the market. Currently, the VIX is reading a low of 15.90, nothing too low that scares me, but a number that has me put a caution flag to it. As you can see from the weekly chart, the VIX failed to get up past 20, and this is very bizarre since we just had a 7.5% pullback. This makes me think that we are setting up for a bigger VIX move in the future. I do not believe that this will come by years end, but it may be significant when our 5th wave completes.
‘As IBM goes, so goes the market’, was a relevant saying years ago, and still holds true today, but for another company. I’m sure you can guess, yep, you are absolutely correct if you said Apple. Apple is our market mover, and as Apple goes, so does our market. With a market cap of $500 billion, it has quite a bit of say as to where we are headed. This is why analyzing Apple on a constant basis is critical to staying on top of current market moves. So where is the ‘big fruit’ headed in the future? This might be a sensitive subject for a lot of investors/traders as they were in shock this past week seeing Apple fall 6% in just one day, and 10.5% for the week. 6% was the largest single day drop in Apple since 2008! A bigger decline like this must mean that we are setting up for a bigger rally…. right? Yes, I believe so, and in the chart below you can see that I have the all time top in Apple, as my wave 3 and have this current decline as my wave 4, with a 5th to come. Let me warn you that 4th waves have no wave structure that they need to adhere to, so trading them is an extreme challenge, and is one of the hardest things you can do as a trader. I do expect the wave (v) of 4 to complete near the 490 regions. So with that said, I expect the pullback to continue in Apple with the coming week. When the price does hit those levels, this is where you can begin to look for long positions. If this 5th wave plays out in a typical 5 wave fashion, we will be targeting at a minimum 700 with the upper targets being 900. Until then, let Apple come down a little bit further before you begin to look long.
Author: Peter Nitso
Email: pnitso@yahoo.com