IM Report November 21 2010 Lvte 10

8/8/2019 IM Report November 21 2010 Lvte 10

1/19

1 Corey Rosenbloom, CMT Afraid to Trade

Inter-market Technical Analysis for November 20, 2010

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Summary Comments

Ten-Year Notes: The higher timeframe for Note prices indicate a deeper pullback is likely, and even the daily chart

supports this logic. However, monitor price to see if $124 holds, and if not, target $122.

S&P 500: The key short-term levels to watch are clear: 1,200 as resistance (a break targets 1,230 and a break

there targets much higher prices), and 1,165 as support ( a break targets 1,130 and a break under 1,100 targets

1,140).

Gold: Gold is either forming an intermediate reversal signal here or is just completing/finishing up a short-term

retracement to work-off overbought conditions. What happens at $1,400 - should bulls rally back there - will be

key, along with if the $1,320 support holds.

Crude Oil: I explain how price is forming nice sideways lines of reference that are probably the best indicators of

how to play oil short-term. For now, watch support at $82 and resistance at $88.

US Dollar Index: I explain how the Dollar - at least seen on the daily chart - is either in the earliest stages of an

intermediate trend reversal, or will fail with the cluster of resistance at $80 in the weekly chart.

Remember, a DECLINING Dollar (Index) is BULLISH for Stocks and Commodities and is BEARISH for Bond Prices

A RISING Dollar (Index) is BEARISH for Stocks and Commodities and is BULLISH for Bond Prices.

Yields generally follow in the direction of the stock market and are always inverse bond/note prices.


2/19



10-Year Treasury Notes ($UST Price)

Monthly

The main idea from the higher timeframe is that bonds - on the monthly frame - have no logical support level except the

$121.30 area, which is the rising 20m EMA. Notice the structure of prior pullbacks/retracements DOWN after strong up

moves. That is the bigger expectation here as well - that bonds will retrace back to a lower support level - like the 20 or

even 50 EMA (which held support in the past) - as the next likely bigger play.

The $127.50 overhead target appears to have successfully held as resistance, making the bigger picture expectation nowa downside move to the $121/$122 level.


3/19



Weekly

The breakdown under the 20 week EMA is a classic sell signal, and if the 10-year note price remains under the 20 EMA at

the $125 level, then the next expected play becomes a retest of the 50 week EMA at a minimum, which happens to form

a confluence (on multiple timeframes) at the $122 level. Officially, we have a dual confluence - 50w EMA at $122.47 and

lower weekly Bollinger at $127.93 - as the WEEKLY confluence support level - along with the 200 day SMA as we'll soon

see on the daily chart at $121.95.

Unless we get a support bounce here, as long as price remains under $125, odds favor a downward retest of $122 at a

minimum target.


4/19



Daily

In last week's report, I mentioned watching the $125 level as the key 'make or break' support. Early in the week, price

gapped down through this level, officially triggering a 'sell' bias. The breakdown under the daily EMAs and under the

lower rising trendline - particularly after the triple-swing negative momentum divergence - argue for even LOWER prices

yet to come in a short-term trend reversal move down. The likely target happens to be $122 which is the 200 day SMA.

Keeping an open mind, it is possible buyers try to support price at the $124 level which was the September price low, so

be aware of that potential - any bounce should not go back above $126 as this represents EMA convergence (and a

potential 'cradle sell' trade).

Of course, anything above $125 targets a "popped stops" break to $128 in an alternate play.


5/19



US S&P 500 ($SPX)

Monthly

On the larger structure, we still have a wide range of uncertainty (meaning "we are in a long-term sideways range")

between 1,040 (1,000) as the floor and 1,228/1,230 as the ceiling. The QE2 Thesis suggests we will breakout to the

upside, so any move soon above 1,230 should be BOUGHT for a theoretical unlimited long-term target (1,300, 1,450,

and 1,575 all come to mind and could be hit with an upside break). However, UNTIL price breaks above 1,230, this

period officially is a sideways trend with massive resistance at 1,230, making what happens here key: a breakout is a

buy... but anything less targets a retest of 1,040 over time. Anything under 1,000 potentially collapses the market with

the headlines expected to be "QE2 Failed - There is Nothing More that Can Be Done."


6/19



Weekly

Strangely enough, the key Weekly Levels remain the large-scale Fibonacci Retracement levels, being 1,228 as the 61.8%

Line and 1,014 being the 38.2% Line (these levels remain constant). The market has traded between these zones for

over a year now and you should classify the intermediate trend as SIDEWAYS or COILING or RANGE-BOUND. Thus, this

is NOT an uptrend and NOT a downtrend - traders who fail to understand that risk disappointment. Thus, IF the range

holds with 1,230 as key resistance, THEN the next likely intermediate (3 to 6 month) play is for a retest of the LOWER

end of the range at 1,040 at a minimum. That will be the dominant "Rangebound" thesis unless proven otherwise with a

clean break (on higher volume) above 1,230. Be long biased/positioned - particularly short-term for Popped Stops -

above 1,230 but otherwise be cautious here with the cross-currents and conflicting chart signals that mark a true

consolidation/range period.


7/19



Daily:

For short-term players, the following IF/THEN Grid is active:

To the UPSIDE, this is just a simple retracement in the context of a rising trend. Thus, because 1,165 held as expected

support, THEN any move back above 1,200 (key level) targets an IMMEDIATE move up to 1,230. Any move up above

1,230 on higher volume/momentum IMMEDIATELY is a breakout move that swing, intermediate, and position traders

will likely 'pile in' and short-sellers will likely 'pile out."

On the bearish side, this little three-day move up may be seen - for now - as a counter-push up in a new downtrend that

started in early November, thus 1,200 should hold as resistance. IF 1,200 holds as resistance and the market begins

heading lower, taking out 1,160, THEN this is a new short-term downtrend (or beginning of something larger) and thus

downside targets should be played for - including 1,130 again, with a break under 1,130 targeting a potential 'collapse'

to 1,040. Anything under 1,040 targets 1,000 and anything under 1,000 is in line with a 'market collapse' thesis.


8/19



Well this is interesting. Normally we look to the recent trends (not so much absolute values) of the Retail (red) and

Professional (green) CoT data to get a sense of what the "Smart Money" and "Dumb Money" are doing in terms of

positioning on the large scale, and much more often than not, the Professionals get it right in advance of a market top or

bottom while the retails get it wrong. While that's been true in a big way since the 2007 top, 2009 low, and through the

twists and turns recently, the September to present period has been different, with professionals positioning LONG in

advance of the rally but then apparently doubting it halfway through, with retails being short at the start of the rally and

believing it halfway through. In other words, since the flip-over in mid-September, this particular indicator has 'failed' inthe sense that professionals have been short while retails have been long ... and the market kept rising. History aside,

now we have BOTH professionals and retails short and commercials HEDGED long. What that tells me is that ALL

GROUPS are betting/positioning for an impending market decline, or at least are hedged (which may be the true answer)

in the event that a market decline occurs. Remember, Commercials are often called "hedgers" so they are often seen as

"hedging" a portfolio (perhaps positioned short) with LONG futures and hedging a portfolio (long) with SHORT futures.

Both retail and professionals are often making pure directional bets on the future. Keep this in mind as you interpret

this indicator - it appears to be a bit off-kilter right now. Of course, if the market does crash soon, we'll look back to this

and say "A-ha! Look! ALL participants were positioned for a future market decline."


9/19



An update to the Gann Squares (green horizontal lines) and Andrews Pitchfork (off the March 2009 low - blue) tools.

For new members, all you need to know is that the Green Gann Square Lines are permanent price levels based off the

March 2009 low (666.79) where a mathematical formula calculates these levels (as taught by WD Gann). Main idea -

watch what happens to price as it interacts with any of the Gann Square Lines to see if a confluence forms with any

other major technical indicator - namely price and Fibonacci. A BREAKTHROUGH beyond a Gann Level sets up a target to

play for the NEXT IMMEDIATE level where you again see "will the market breakthrough or hold/reverse" and of course if

the market REVERSES at a Gann level (which often happens - though very rarely exactly at the precise level - see 1,044

for example) then the next play is for the opposite Gann Level.

Anyway - simple explanation: the two immediate Gann Levels to watch include 1,178 for support (which may very well

hold) and then of course 1,212 if indeed 1,178 holds. A move under 1,178 targets 1,143 (confluence support near there)

and a move above 1,212 - which also comes into contact with the lower Andrews Pitchfork Level (as potential

resistance) targets higher prices in a breakout move (the next Gann Level higher is 1,247).


10/19



Gold

Monthly

Gold has been supported in part due to the QE2 thesis and global efforts to weaken currencies (examples include the US

and Japan) to boost their stock markets/help the economy. As a result, gold rises as a 'consequence' of unusual Central

Bank activity. Of course, gold also is a tangible/hard asset (unlike stocks, bonds, or currencies) so in times of economic

uncertainty, investors turn there. So as long as this trend continues, despite how high the price of gold has risen,

fundamental and technical factors combine to support EVEN HIGHER prices if buyers can get gold back above $1,400. If

not, then it would certainly be reasonable to expect an intermediate retracement/pullback but NOT trend reversal (yet)in gold.

So, watch what happens here at $1,400 and monitor the lower frame charts much more closely. The monthly frame

gives us 'uncertainty' from $1,300 to $1,400, with a bearish bias under $1,300 targeting $1,200 again. Otherwise, any

breakout above $1,400 that holds thus targets $1,450 and $1,500 at least over time in an intermediate play.


11/19



Weekly

The weekly chart IF/THEN levels are relatively easy to reference - as they're the same as the monthly chart and they

converge with simple "round number" levels ($1,200 and $1,300). It may seem too easy but sometimes that's what

works.

The negative momentum divergence and failure test (inability of price to break above $1,400) argue for odds favoring a

LOWER price move to challenge support - initially at $1,300 (20w EMA and round number) - so that is the dominant

expectation, but any move under $1,300 triggers a short-sale to target a deep retrace to $1,200. Thus the 'neutral zone"

is $1,300 - $1,400, with the Buy zone being a move above $1,400 ($1,425 specifically) and the sell zone being under

$1,300.

Any further price push and trend continuation beyond $1,430 should be bought no matter how strange it feels

psychologically.


12/19



Daily

For short-term oriented traders, the IF/THEN levels are $1,320 as key support (look to short under here, otherwise be

neutral/bullish) and $1,420 (potential resistance, but a buy trigger if above $1,420/$1,430). It's possible price forms a

little Head and Shoulders pattern here, and if so, $1,320 would be the neckline and $1,420 the head, giving a downside

price projection of $100 under the neckline or $1,220. That 'magically' happens to be the rising 200 day SMA, so

therefore ANY breakdown under $1,320 targets a short-term fall to $1,220 as a potential target.

Otherwise, monitor price closely as it remains bound between $1,320 and $1,420.


13/19



WTI Crude Oil ($WTIC)

Monthly

Like stocks, oil has a wide 'uncertainty' area that represents is year-long sideways consolidation line (easily stated at $70

and $90, but more precisely at $87 and $67). Thus, like stocks, any move above $90 targets a theoretically unlimited

'bull market' breakout that takes price at least to $110 while anything less targets a return to lower levels - potentially

even $67 again.

A move under $67 would only occur with headlines of "QE2 Failed - Nothing Left to Do" as the Fed's goal through QE2 isto manufacture/manipulate inflation, so if oil goes under $67, it means that they failed.


14/19



Weekly

The official trend - clearly observed here - of oil is SIDEWAYS. That places it in a long-term coil (tight spring) that is

building energy for a breakout move. It's best to play the breakout move rather than to predict the direction in which it

will break, and with that logic, upside targets on a breakthrough beyond $90 include $110 and $130. A breakdown

under $70 targets prior price swing lows which happen to form at "Round Number" levels ($60, $50, $40) but as long as

price DOES NOT break the coil boundaries, THEN odds favor testing and retesting back and forth between $87 and $67,

meaning the NEXT likely move - according to the chart trend - is a fall to $70.

The moving averages - at least on the weekly frame - are irrelevant in providing support or resistance.


15/19



Daily

There's an event tighter coil forming on the daily chart - and it's between $80 and $88 immediately, and then broadly

from $72 to $84 (or even $88). What that means is that price is forming key support/resistance levels at tighter and

tighter levels - meaning you'll do best to look at PRICE and trade short-term moves off support and into resistance,

instead of trying to use complex analysis to predict the future. That means, if key support at $80 holds, look to play a

possible up move to challenge $88 next. And if $80 breaks, look to short (particularly under $79) to $72. Keep it simple.

The negative divergence at the upper Bollinger with reversal candles at the $88 level - after a 5-wave progression - is a

good example of how sharp downside moves can form when non-correlated indicators/methods converge with a unified

message: downside prices. It doesn't have to be that complex, but it's neat when those type of variables align.


16/19



US Dollar Index ($USD)

Monthly

I've been heavily focused on the dominant trendline currently at the $75 level - so far it held as support and the Dollar

has rallied off the expected support lows. It's hitting lower frame reference levels, but according to the coil/trading

range/sideways action on the monthly frame, if price breaks above these lower timeframe levels, higher prices will be

realized which could include a move back to $85 or $87.

Given the higher timeframe structure is open to a bounce up, any further downside move under $76 - breaking support -

should be shorted for a retest of $74 or even $70.


17/19



Weekly

Here are the key overhead resistance levels to watch in the Dollar Index: The cluster at $80. I put a gray box there to

represent the EMA and price trendline (August low) support. The neutral zone thus is $76 to $79 (here) with the

"bull/buy" zone being anything above $81, which triggers an immediate move to $83 and anything above $83 triggers a

possible intermediate move to $88.

If the resistance cluster holds at $80, look for $76 to be realized and tested, and short any move under $76 to target the

November low last year at $74, and anything under that to trade back to $70.

Remember, a BULLISH dollar is COUNTER to the QE2 thesis, so if the Dollar Rises, it will be in line with the "QE2 Failed -

Nothing Left to Do" thesis.


18/19



Daily

It is indeed possible that we're looking at the start of a trend reversal here in the Dollar Index. In my premium session in

Las Vegas, I explained the six-step process for a Trend Reversal and we're seeing the earliest warning signs that the

downtrend might be reversing. Those are the positive momentum divergence (off November low), price breakout above

the 50 EMA (this week - but it needs to get BACK ABOVE to be valid - otherwise it doesn't count), and the Kick-off Sign of

Strength (new momentum high when price is not making a corresponding price high). If this winds up to be the case, we

could be looking at a Wave 1 sort of move beginning, but of course we need to watch this early 'spark' to see if it

develops into a flame, or just fizzles out and price resumes its downtrend. In simple language - look to get long for a

possible intermediate term trend reversal on a break above $80 that eventually carries price above $83, but if these

bullish follow-through signs do not deliver, then be neutral here and short under $76 for a steeper leg down to $74 or

even $71 over time.


19/19

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Disclaimer:

All information is from sources deemed to be reliable, but there is no guarantee to the accuracy. Information is for educational purposes only and

is not intended to give specific trading advice. Past performance is no guarantee of future performance. Investment/ trading carries significant risk

of loss and you should consult your financial professional before investing or trading. Your financial advisor can give you specific financial advice

that is appropriate to your needs, risk-tolerance, and financial position. Neither Corey Rosenbloom nor Afraid to Trade was compensated in any

way by any of the broad markets, stocks, or securities discussed in this report. Corey Rosenbloom is compensated by the sale of this report and not

by any underwriter or dealer associated with these markets. Opinions are based on widely-accepted methods of technical analysis including the

Elliott Wave Principle, Oscillators/Indicators, Candle-charting analysis, Volume, Fibonacci, and other methods of analysis. No specific

recommendation is given to buy, hold, or sell any of these markets/securities or exchange traded funds related to these markets. Neither Corey

Rosenbloom nor Afraid to Trade is a Registered Investment Advisor. Long-term investment success relies on recognizing probabilities in price

action for possible future outcomes, rather than absolute certainty risk-management is critical for success. Error and uncertainty are part of any

form of market analysis.

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IM Report November 21 2010 Lvte 10