The markets tested the neckline of a two-month head & shoulders setup.  There was no decisive break and the markets should now test the 20 day exponential moving average (purple line).  Note how this has provided support well into the June timeframe, with the latest round of consolidation between the neckline at 870 and shoulder of 920.  Yesterday produced a ‘wr7′ signal – widest range in 7 trading sessions.  Expect today to produce a very narrow range, perhaps an ‘nr7′ – narrowest range signal.

12:00 pm update – An intraday test of the 900 century mark and 20 ema levels.

The market is now at a critical juncture.  Internals suggest that the intermediate term defensive / capital preservation team is now on the field.  A head and shoulders pattern (rounded top) is now visible on most major indicies.  Today’s price action will most likely confirm this setup on an impulse move.

The yen has now officially tagged the head & shoulders target I posted on February 5.  This is a level to take profits in cross trades and/or tighten stops as it tests the previous inflection lows.

10:35am – market immediately opens with a third push lower – wolfewave pattern.

11:30am update – pattern targets are met.  Note the lack of overnight globex futures quotes, therefore inflection points 3-4 are invisible in this chart.

2:30pm update – ES has a second lift and consolidation sequence.

5:30pm recap

The Japanese yen has shown a lot of strength, however, at this juncture a ‘pocket trade’ is asserting itself.  At a smaller scale, a head & shoulders pattern is also visible, which should take it back to a retest of the 1.06 level.  This is a short candidate in any cross trade for the next week or so.

I also realized that the currencies futures are better served by using the continuous contract symbols, since they will illustrate overnight and intraday prices ranges more clearly.  Below is an example of the yen continuous contract (J6H9 compared to above JYH9) and the improved detail.

[15:00] ES .. unable to hold above trendline off spike lows .. 2nd head’s up
[15:17] test of rising trendline as overhead resist here..  http://charts.dacharts.com/2008-10-27/Buff_67.png
[15:31] seems like a good level to grind out a right shoulder on intraday h&s
[15:34] no edge into close
[15:43] index futures coiled into symmetrical triangles .. constricting ranges
[15:48] ES 863 .. watch lower bounds for contination signal .. h&s right shoulder .. http://chart.nu/ES_intraday_20081027_tri.gif

[15:54] break of lower triangle bounds
[16:01] larger bear  pennant pattern measurement reached .. amazing speed
[16:02] h&s target tagged, also

Session Start: Thu Oct 23 08:12:48 2008
Session Ident: #pitstock

[11:13] good afternoon
[11:20] ES .. 872.5 -> 922.5 = +50 .. am action set up gartley pattern on a-b-c retrace .. 882.75 + 50 -> 932.75 target for full bull flag measurement .. not quite there, but a wolfewave will setup on push to target levels
[11:33] It seems the s&p500 is being whipsawed more by the major oil components than anything else .. XOM, RDS, CVX making for most of index lift due to market caps
[11:40] ES .. attempting to confirm 911 intraday spike high as support
[11:41] bears will look to 918 as a possible right shoulder .. I would prefer to anticipate possibility of a broadening triangle from these levels to 934
[11:44] ES .. small h&s on 5min .. neckline 908-910
[11:47] ES 909 .. neckline test, but also a trendline off spike lows from lift .. key juncture .. http://chart.nu/ES_intraday_20081023_hs.gif

[11:48] <– has stopped trading h&s patterns .. too often they can become continuation patterns .. very dangerous play
[11:56] ES .. the bull game .. http://charts.dacharts.com/2008-10-23/H_80.png
[11:59] not my chart, just am using it for perspective to see the ‘other side’ of trade .. 19000-vol is probably a volume-based charting approach (vs. time-cycle based)
[11:59] very similar to the way that tick charts can aggregate a certain number of trades into a single bar

[12:07] ES .. small head’s up on break of rising channel
[12:09] amazing some of the insights that charts seem to bring out .. fibonacci rings completely new to me.. http://charts.dacharts.com/2008-10-23/shawn22.png
[12:12] ES .. second 10-handle swoon 917 – 907 = -10 .. 914 spike high ‘b’ -> 904 ‘c’ wave target here
[12:14] if still riding h&s pattern, expect bounce to retest neckline at 909 levels
[12:23] ES .. next trigger at test of lower bounds off spike lows .. http://chart.nu/ES_intraday_20081023_tl.gif

[12:23] keep 892 levels on radar
[12:25] entering BZ “Brach Zone” levels of 62%-78% retrace
[12:28] small h&s .. 909 neck 923 head -> +14 .. 909 – 14 = 895 targets .. tagged
[12:33] 78% retrace 886 levels .. make-or-break
[12:39] http://chart.nu/ES_intraday_20081023_x.gif
[12:41] nite, all .. that’s it for my trading day

[13:33] NDX /naz100 is resolving symmetrical triangle on the daily chart to the downside .. it doesn’t have the benefit of an oil lift, and may be a way to view markets without the weight of bigcap refiners
[13:34] all indicies .. are rubbing the lower bounds of this continuation pattern a bit raw .. 4x knock sequence / setup
[13:35] ES .. in (yet another) bear flag a-b-c sequence / breakdown
[13:36] http://chart.nu/ES_intraday_20081023_abc.gif
[13:38] ES .. resolving daily triangle to downside .. 4x knock is openning up the basement door
[13:39] ES .. third knock to left .. trendline off spike lows from 10/10 .. KEY pattern resolution levels .. http://chart.nu/ES_intraday_20081023_4x.gif
[13:40] this is where the frog meets the boiling water
[13:43] ES .. overlapping structure on 5min visible suggesting nerve canal struck
[13:45] a wolfewave lurking in this jack-knife situation .. http://charts.dacharts.com/2008-10-23/DYoung11.png
[13:48] have found that wolfewave should be taken with almost 3-5pt stop .. the failed patterns usually lead to “upcrash” scenarios .. haven’t had a clear down crash situation (YET)
[13:53] ES .. ww setup .. http://chart.nu/ES_intraday_20081023_ww2.gif
[13:56] trigger will require wide stop .. first ww setup I am not 100% confident in based on larger timeframe technicals
[13:58] GC /gold .. monstrous wolfewave on weekly .. am giving it to 650 and looking for narrow range bar before any entry .. http://chart.nu/chart?w&m_start=9&y_start=2006&filter=8&ticker=GCZ8
[13:59] ES .. ww trigger @ 871
[14:02] basement door opening .. is this the ‘downcrash’ level?
[14:04] VIX .. a wolfwave there, too .. dunno what it really signals, however .. http:/chart.nu/chart?m_start=2&y_start=2007&filter=21&ticker=VIX
[14:05] indicies .. ALL symmetrical triangle resolving to downside here
[14:11] ww setup .. http://chart.nu/ES_intraday_20081023_ww3.gif

[14:12] wide stop required for fear of downcrash and technical levels
[14:17] gonna have to call this inflection point the “wolfetrap” .. failed pattern signal is almost as strong as a bull or bear flag
[14:18] mesasurement possibilities on pattern failure .. http://chart.nu/ES_intraday_20081023_xx.gif
[14:23] XAU /gold miners .. back to levels when gold was breaking above $300 .. HUI looks the same .. http://chart.nu/chart?m&filter=5&ticker=XAU
[14:24] Greenspan Concedes to `Flaw’ in His Market Ideology .. http://www.bloomberg.com/apps/news?pid=20601087&sid=ah5qh9Up4rIg&refer=home
[14:34] ES 871 .. last upswing > previous downswing
[14:44] ES .. small a-b-c bounce to test lower bounds of multi-day symmetrical .. keep lower bounds off spike lows on radar for next breakdown.. http://chart.nu/ES_intraday_20081023_wwt.gif

[14:47] not with the choppy lift we are getting, now .. was happy just for the ‘god trade’
[14:49] ES .. small h&s .. seen it once, expect it twice .. http://charts.dacharts.com/2008-10-23/midge71.png
[14:52] h&s pattern .. usually evolves from a rising / falling channel .. the break of channel sets neckline .. retrace to lower bounds of rising channel sets the right shoulder
[14:55] nice one, ADM .. fwiw, the charts I am using often come from other sources – most notably ensign’s great bunch of traders in b-line channel
[14:57] irc++
[14:59] NQ /naz eminis .. http://charts.dacharts.com/2008-10-23/Kongfuzi54.png
[15:03] e-wave .. a excellent primer, with some charts from Mary (best realtime e-wave trader I’ve met) .. http://www.ensignsoftware.com/tips/tradingtips50.htm#Application%20?
[15:03] a must-read for gartley pattern players
[15:05] small h&s target completed around 860 (10-handle)
[15:09] a-b-c retrace in progress
[15:09] ES .. target measure at 885-888 levels
[15:10] impulse on this one is up
[15:12] ‘c’ complete on tag of measured move
[15:13] impulse is UP
[15:14] ww target may even get tagged
[15:14] am not betting on it, tho
[15:16] ES .. update .. http://chart.nu/DJI_intraday_20081023_abc.gif
[15:25] ES established spike high as support on pullback .. http://charts.dacharts.com/2008-10-23/av_5000807.png
[15:27] JY /yen .. cup&handle breakout on monthly working nicely
[15:31] nite, all .. over&out .. exhausting day
[15:56] ES .. wolfe in pack .. 3rd push .. http://chart.nu/ES_intraday_20081023_3x.gif