Tuesday, November 30, 2010

Bearish Triangle In The SP500

The intraday pattern in the SP500 appears to be developing as a bearish descending triangle. The key to maintaining the formation is completion of waves (c), (d) and (e) over rest of this week without violating yesterday's low of 1173.64 or the 11/16 low of 1173. Wave (b) probably completed yesterday at 1173.64. Waves (c), (d) and (e) should be complete by Friday or Monday at the latest.

If the triangle does complete as suggested, the only question will be whether it completes above or below the August high. The former will allow for the 4th wave interpretation to remain on the table while the latter will leave us with the more likely outcome that we are currently in the middle of a much larger triangle for wave [B] of x for the overall cyclical bull market. I suspect that we will see the latter outcome, but we won't know for sure for at least 3 more weeks.

The other valuable piece of information from this triangle is that it will invalidate the possibility of a flat/expanded flat correction. However, we will still have to be on guard for the development of a double zigzag for wave (C) down which is now underway that could extend well into January.

Monday, November 29, 2010

FTSE At Trendline Support

After reaching trendline support a multi-day rally would not be surprising, but we will be watching for a break of the trendline to confirm lower prices and the invalidation of the 4th wave scenario.

Upward Correction Still Underway

The current intraday pattern in the stock indexes lends itself to a couple of interpretations. Either this morning's low in the SP500 ended a small degree double zigzag b wave, and now wave c wave up to retest the November 18 high is underway. Or this afternoon's rally is just retracing part of the decline from last Wednesday's high. Either way, the market will be headed lower whether it be from this afternoon's high or a little higher.

Saturday, November 27, 2010

JNK Shows Falling Appetite For Risk

The appetite for risk as measured by demand for high-yield corporate bonds is falling, and not just falling, but falling out of a rising wedge pattern that targets the May lows. The JNK has fallen below its January high. The February low and the May low occured close to the 1.0 and 1.618 extensions of the January range. The May low coincided with the June 2009 high. The top in JNK was on 11/4. The typical length of the retracement of a rising wedge pattern is 1/3 the length of the pattern. In this case, it works out to 39 trading days, which targets a bottom on December 31. It could occur sooner or later, but the lower target range is a high probability target.

Notice how the JNK closed near it November low. This suggests that any continuation of the short term rally in stocks next week will fail, and probably in a sharp fashion to play catch up. Also, the pattern in the JNK fits with the expanded flat or triangle thesis that we have been discussing. The more violent the coming decline, the more likely it is that we will see the expanded flat correction as opposed to the triangle, or it may be that markets are mixed with the Qs in a triangle while other indexes complete the expanded flat.

In any case, the downward pull of the 10 month and 20 month cycle that is currently in force should bring a conclusion to the correction that began April 26. All in all, it appears that this will not be a typical December for a mid-term election year as the market may be down for almost the entire month.

Friday, November 26, 2010

FTSE Heading Toward Trendline Support

For whatever reason, over the last two years the elliott wave pattern in the London FTSE index has been cleaner and clearer than the US indexes. From March 2009 to April 2010, the FTSE traced out a very clear 5 wave advance without the overlapping waves present in the US indexes. Yet, the action in October this year was not so clear and we are left with the same ambiguity as in the US.

However, the FTSE is clearly headed for trendline and channel line support. It needs to hold this support to prevent breeching the November low. I think the November low in most stock indexes is the critical level to be watching. Once it gives way the only downside support will be the July/August highs, but touching those highs will invalidate the impulsive wave count from the July low, which will be a big blow to the bulls.

Regardless, we will still be left wondering whether we are completing a flat correction or are in the middle of a larger triangle until the action in December plays out. One interesting possibility that I had not considered before is that the Nasdaq 100 could be forming a rare, but valid running flat. In a running flat, wave (B) exceeds the high of wave (A), but wave (C) does not reach the low of wave (A). This would be a very bullish outcome and really keep everyone guessing as most would see the 5 wave decline that fails to test the July low as a clearly bearish turn of events.

The fact is that the market action relative to current events is not dissimilar to what occured earlier this year, and we should be ready to take full advantage of any repeat of adverse market action.

Wednesday, November 24, 2010

Before You Get Too Excited

First of all, today was not a valid follow-through day as volume was lighter than the day before even though the Nasdaq 100 and Composite had gains greater than 1.7%. More importantly, the action since last week's low still appears to be an upward correction. For the Dow it looks like a 5-3-5 zigzag on the 30 min chart. Below you can see a clear head and shoulders top pattern developing. These have not panned out well over the last two years, but perhaps after so many failures this one will work. If it does, the target is below the August high.

Happy Thanksgiving!

Tuesday, November 23, 2010

Impulsive Decline In The FXI

The clearly impulsive decline in the FXU is consistent with wave 1 of (C) of a large flat correction. Notice how today's low almost touched the August high. We have discussed how the FXI has been leading the US indexes, and while there may be a near term rally, this action suggests that the US indexes may follow suit. If so, we should see downside acceleration very soon.

More Downside To Come

The action since the late morning low is clearly corrective against the early morning decline. There will more downside to come either late this afternoon or tomorrow. The decline should accelerate on another failure of Dow 11,000.

What's Going On With Elliott Wave Counts?

When I look at the lack of congruence between cycles analysis, the elliott wave count and seasonal patterns, everything seems to be out of whack - a technical term meaning "what the heck is going on?"

The move down from the recent November high is clearly not impulsive on the intraday charts. This makes it difficult to conclude - as much as might want it to be - that wave (C) down in a flat correction is underway. On the other hand the various stock indexes are really not in sync with the impulsive count from the July low either. For some, the rally from the August low just does not look all that impulsive, which does not fit with the idea of a 3rd wave.

It is beginning to look as though we could be in the worst possible outcome for traders, one that I have suggested a few times, but had forgotten about over the last couple of months. Folks, we are probably in a very large [B] wave triangle. For the Qs, it would be a running triangle. For other indexes it would be an ascending triangle. This would explain the lack of clearly impulsive moves, the corrective quality of most of the swings, the slight new highs to new highs, the long wave (B) which is common in triangles, and the continuing strong performance by top-rated stocks. We are running out of time with respect to the coming cycle low due between mid-December and mid-January, so we would really have to a sharp decline develop soon in order to define the cycle low. Should we see such a sharp decline it would most likely be wave C of (C) for the triangle case.

If this is a triangle, then given the overall time of development so far, it may take well into March for it to reach a resolution. Fortunately, the fact that the Qs would be presenting a running triangle eliminates a bearish resolution of the triangle. My view at the moment is that we must wait and see if the July/August highs are touched to rule out the 4th wave count. If that happens, unless we see a powerful move that undercuts the August low before December 21, then the probability that the current market action is a very large triangle rises greatly.

So what should we do now? I will be looking to exit short positions at a 61.8% retracement of the July to November rally unless the August low is broken before mid-December. After that I will be looking to be only long until the top of wave [C] while using waves (C) and (E) of the unfolding triangle to build long posiitions.

Triangles can be frustrating affairs, but once recognized confidence in the outcome increases greatly. My hats off to the elliott wave bloggers that are keeping up with the intraday counts. Some are really good, and I plan to add them to my blogroll soon. However, tracking the intraday moves can lead to a myopic view of potential outcomes. Let's see if clarity develops over the next 3 to 4 weeks with respect to a possible triangle count.

Saturday, November 20, 2010

Dollar Is Key

The Dollar broke out above its intermediate term downtrend line on 11/16 and is now consolidating its gains since bottoming on 11/4. The impulsive move since 11/4 exceeded the previous swing high, and coupled with the trendline breakout, there is little reason to believe that the Dollar rally will not continue.

For the time being the inverse correlation between the Dollar and stocks and commodities remains in force. Thus, we should expect that a resumption in the Dollar uptrend will result in additional downside for stocks and commodities. If the next move up in the Dollar is a 3rd of a 3rd wave as some have proposed, then the coming decline could be severe. This fits with the expectation that we are now in wave (C) of a large flat correction in stocks.

Of course, if the trendline breakout in the Dollar was just a fake-out, then this interpretation is not valid.

Friday, November 19, 2010

More Rally Next Week

There are many who would like to believe that yesterday's gain is the beginning of another leg up in the rally that began August 27 (or July 1), and I suppose anything is possible in this crazy market, but after stalling at the April high and median line resistance, the most likely next move is a correction to the lower (magenta) channel line which is now around the August high.

I suspect that we will see a little pullback early next week, more rally around the holiday and possibly into the end of November. Then a break of the September to November channel line will usher in a retest of the April/November lows. Once that level around 1170 to 1173 fails then a quick decline to the August high should follow.

If the correction doesn't continue as outlined above, then we could very see another huge runup into the end of the year. I think this is doubtful now, but this crazy market could do about anything.

Thursday, November 18, 2010

"GM IPO Soars"

Oh brother!!! GM prices at 33 and closes its first day at 34.19 after reaching an intraday high of 35.99 and the headlines read "GM Soars". I think we will see whether or not it soars over the next few weeks or not, but today's action was not soaring. And why would the rest of the market go up because people are buying GM? I really wonder who they let write the stories. Is this an orchestrated pump and dump?

We got the bounce - all in one day it seems. The Qs closed below the middle of the range, which showed weakness on an otherwise solid up day. A move below today's low could put an end to this mini-rally. Today's advance did not qualify as a follow-through day as it occured on day 2 of a rally attempt. While some are looking for this little rally to continue for a few days, I think it is just as likely that it is all given back tomorrow followed by downside acceleration. We will see. A move above today's high tomorrow would likely lead to additional upside before the correction resumes.

Oversold Bounce

IBD has called the "Market In Correction" as of yesterday's edition. Futures are up substantially this morning but it will take alot more that a one day rally to confirm a new uptrend.

A sharp bounce is not unexpected as the NYSE McClellan Oscillator had reached an oversold condition below -80. Reaching this level in such a short time from the top - only 7 days - coupled with a broken trendline is more consistent with initiation of a new downtrend rather than a brief correction. Other indicators such as the 14 day RSI are far from oversold, however, we must be open minded as the 4th wave scenario is still on the table until the July/August highs are broken.

We would like to see the SP500 remain below 1207 for the downtrend to remain intact.

For those following the IBD strategy, today's bounce would be a good opportunity to enter a short position or one could wait for confirmation with a break of Tuesday's low.

Tuesday, November 16, 2010

IWM Breaks Trendline

In my opinion, we are probably at least a month away from a correction low. The IWM has already fallen over 5% from its high and support at the July high is only 6% away. The force of the trendline breakdown today was significant and greater downside action should be expected, so unless the market finds a footing soon, the 4th wave scenario that many are proposing could be invalidated within a week.

Today's range and close were very similar to May 4th, right before the "Flash Crash" episode. Another such event, or least a dramatic selloff, could be setting up. The only difference being that the market has become more oversold than it was on May 4th and a bounce may be coming first.

A valid MACD negative divergence sell signal was given on the IWM and the IWM can be shorted. Entry on a bounce would be advisable. Today's distribution day should push IBD to call the Market In Correction. If so, that would be another reason to look for a short entry. That said, we have to respect the support at the July high (August high in other indexes), so a staged entry would also be advisable, i.e. 1/4, 1/3 or 1/2 positions depending on your account size.

NYMO Confirms Correction Underway

The NYMO fell below its lower rising trendline yesterday confirming that a significant correction is underway. While the consensus is now that a 4th wave of minor degree is in progress, we are already seeing signs that this correction may be deeper than would be permitted by a 4th wave as the stock indexes are poised to put in a major monthly reversal bar with a move below the November 1 low.

The expected period for a low based on the 10 and 20 month cycles is December 15 to January 15, but more likely around January 6. There is a lot of time left for this correction to unfold. What we will be looking for is a deep low in the NYMO, which is the correction momentum low, followed by a higher low near the expected cycle low period in conjunction with a completed 3 wave or 5 wave pattern. A 3 wave pattern would be associated with a 2nd or 4th wave. A 5 wave pattern would complete a flat correction from the April high. The latter will unfold with greater force and throw the bulls completely on their heels, but will provide the best buying opportunity since the March 2009 low.

Another distribution day today should push IBD to call the "Market In Correction" from the current stance of "Uptrend Under Pressure".

Monday, November 15, 2010

Sunday, November 14, 2010

A Review Of The MACD

I personally think that the MACD - moving average convergence divergence - indicator developed by Gerald Appel with the settings of 12,26,9 for the two moving averages and the signal line, respectively, is one of the most powerful and yet underappreciated tools that we can use to trade in the financial markets. I was asked to update the Strategy Tracker for the MACD, and I am assuming that there is an expectation that the results of the latest MACD signal in early September would be added to the results. I want to explain why it isn't.

In order to be used effectively, you cannot take every buy and sell signal that results from crosses of the signal lines. If you do, you will find that you will have a lot of losing trades and whipsaws. In order to minimize churning and whipsaws, filters must be added to eliminate some of these trades.

The filters that I am using for the MACD is that we will only take long trades with a flat to rising 50dema or from a rising 200dema with price at or above the 200dema and when there is a positive divergence. Reverse for shorts. We exit long trades on either the second sell signal or if the MACD falls below the zero line. Reverse for shorts.

I have labelled the relevant signals for the Qs above. The interpretations have been a little tricky, and I have used some discrection, but I hope that my explanations will convey how I have applied the rules. At A there was a negative divergence short signal with no ambiguity. At 1, on June 2, there was a valid buy signal as price bounced off of the rising 200dema, but I chose to ignore that signal as price had risen to within 2% of the falling 50dema when the signal occured. At B there was another buy signal off the rising 200dema with a little more room below the 50dema accompanied by a rising bottoms pattern in the MACD. This was also the second buy signal since the April short signal was initiated, and the short position was reversed to a long position. At this point we are long, and we ignore the first sell signal on June 28. As long as the MACD itself does not fall below its low of May 26, we will stay in the position until the second sell signal occurs even if price falls below the May low. At C we have the second sell signal and exit the long position. There is no signal to go short at C since the 50dema is rising and there is no negative divergence.

The signal at 1 was ignored by discretion. Signals 2 and 3 were not actionable according to the rules as set forth. It is possible that the signal at 3 could be considered an actionable long signal, but since the price low was well below the 200dema, the signal was ignored. In most cases, one would have expected a pullback to generate a second actionable buy signal. That did not happen here and a major rally was missed. However, this is not a reason to change the rules. Perhaps better discernment would have led you to conclude that was a valid long signal, and that would be ok, but having not taken it, I will not change the results retroactively. Even without the lastest rally, this strategy as described is up 16% for the year, which is excellent.

Currently, the MACD gave its second sell signal since the rally began, which is a strong indication that a significant pullback or correction is underway. A buy signal with a rising 50dema would be taken should it occur. This goes against my expectation that the Qs will fall below the August high, but that is not something that would fall under the umbrella of discretion.

One more advanced MACD behavior that I would take on discretion (but not include in the Strategy Tracker since it is not a part of the rules) is a hook sell signal. If the market rallies and the MACD attempts to cross above its signal line and fails by turning down without crossing, this would be a valid short signal.

Friday, November 12, 2010

Which Is More Likely?

Of late there seems to be a consensus that wave [C] up is underway, but is it more likely that wave [C] up is underway or that wave (X) of [B] has topped? The XLF did not get anywhere near the April high and the recent November high came after a very clear triangle that means it was likely the final impulse in wave Y of (X). Coming under the November 1 low will confirm that the financials are headed down in wave (Y) of [B] which projects to a low in mid-January.

It seems to me that we should expect the broader markets to be following the same theme. If that's true then the recent November top in the Wilshire should be wave (X), a double top. We will be looking for a retest of the July low. This will be wave (Y) down, equivalent to a C or 3rd wave in force, which may be surprisingly sharp. If we see a violent acceleration in the decline, it could shorten the end point for wave (Y) to mid to late December.

Given the moderated increase in bullishness associated with wave (X) up, the bearishness should become quite severe as the July low is approached creating the greatest buying opportunity since March 2009. Perhaps this is a hopeful interpretation, but while my timing of the count has been off since July, the form fits what I have expected from the beginning. We will just have to give it a little more time to see if it proves to be correct. Either way, an excellent buying opportunity should be here in just a few short weeks.

The Qs may diverge from the Wilshire and SP500 by correcting in a wave 2 of (3) of [C], but the overall outcome will be the same.

Thursday, November 11, 2010

Wednesday, November 10, 2010

Top In Progress

It may take some time for downside acceleration to occur. A break of the November 1 lows should create some selling pressure. While that is below the April highs for most indexes, the Qs will still have support at the April high and then the 50ema. Nevertheless, I strongly suspect that the long awaited correction is now underway with a probable low sometime in mid-December to mid-January. We can evaluate the pattern once we have reached the time zone for the low.

My cycle work is showing the next 10 month cycle low is due January 6. I had charted a probable cycle pattern for this year in the spring, but I had forgotten about it after the flash crash excitement. I wish I hadn't because that chart nailed the late August low and called for a mid-October high. It is now calling for a low in early January. Sometimes it is difficult to keep up with so many charts.

Regardless of the final wave count at the coming low, it should represent an excellent buying opportunity. It should actually be better than the August low, in my opinion, as we will either be entering a powerful 3rd wave in wave (C) up or beginning wave (C) up.

I may not be able to post again until the weekend. We have been fortunate enough to sell (in fact they were presales) the last two townhomes in our development, and I working to finish them by Friday. We obtained the Certificates Of Occupancy today, but there is still alot of cleanup and punch list work to do. I can't tell you how relieved I am. After all of the craziness that has occured in the last 3 years, I am grateful that we were able to find a way to finish the project.

Tuesday, November 9, 2010

Huge Reversal In The Precious Metals

I think the SLV put in a major top today which is probably wave B of an expanded flat correction. SLV opened above the upper 3 SD 20 day Bollinger band and reversed powerfully to close below the upper 2 SD 20 day Bollinger band. Wave B reached the maximum level seen for an expanded flat at 1.65 x wave A, just a little more than a fibonacci 1.618. Wave C down should terminate below the October 2008 low.

The Euro has probably topped as of 11/4 with a confirmed MACD hook sell signal yesterday. Stocks should follow the lead of the Euro and precious metals. The only question is what degree the pullback/correction will be: wave 4, wave ii of 3, or wave C. There's no way to know but the first real support will be the 50dema.

Sunday, November 7, 2010

Put/Call Ratio Finally Moves

The equity only put/call ratio has finally moved out of its neutral range into an area that is often associated with tops. The inverted PPO 50,5,1 does a good job of indicating when the CPCE is approaching a level of excessive optimism as measure by the red line in the lower pane.

As far I can tell, the PPO of the CPCE as shown above gave the best measurement of market sentiment during this latest rally. While many sentiment polls showed either strong or excessive optimism, the PPO of the CPCE stayed in the neutral zone. This was a great clue that the rally had the potential to run. We will watch this one more closely in the future.

Saturday, November 6, 2010

SP500 In Resistance Zone

While the SP500 has managed to breakout above the April high, the volume on the breakout was quite subdued - only barely above the volume at the April high. It is now just above median line resistance from the April to July correction and the August correction. While more upside may be seen near term, 1270 will have to be hurdled before the market can really run without interference. The 1200 to 1257 zone is probably an area that many will see as a selling opportunity, but until there is a break below 1220, the rally will remain intact.

Friday, November 5, 2010

Searching For Clarity

From early in 2009 through 2010 I have believed that the rally in stocks that began in March 2009 would be greater than most were expecting, bulls and bears alike. My personal view is that the market is wave x of a large combination correction. X waves are 3 wave affairs that separate two corrective patterns in a combination to form a larger corrective pattern.

The primary reason for my thinking is that secular bear markets during the last century have consistently lasted 16 to 18 years, and since the 1980s and 1990s secular bull market was the longest of the century, it is reasonable to assume that the following secular bear market would be longer than the previous bear markets - possibly longer than 20 years if Japan is any indication. This means that the low in 2009 was just the end of the first corrective pattern.

However, X waves are corrective patterns in and of themselves which can make following them difficult even if you are confident of the overall outcome. The rally from March 2009 has certainly born this out as wave (A), for example, doesn't really have the true character of an impulse wave, though it has definite similarities in appearance.

We have been trying to determine over the course of the summer and fall whether or not the correction within wave x that began April 26 was over or not, and we still cannot be sure of that, but at least we can be sure that wave x has much further to go since all of the major indexes have exceeded the April highs. The only question left is whether we will retest the July low to complete wave (B) first or whether wave (C) up is underway, and if wave (C) up is underway, what are the likely targets?

There are four probable targets for the Qs: 1) wave (C) = 61.8% x wave (A), 2) wave (C) = wave (A), 3) wave (C) = 161.8% x wave (A), and 4) wave x = 61.8% x wave w. Assuming that wave (C) is already underway, these would give targets of 56.93, 66.79, 82.25 and 80.22 respectively. I think that the higher targets are definitely possible, and with the Qs closing today at 53.67 that represents a substantial return from the current or lower levels.

If wave (C) is already underway, then the current rally is most likely wave 1 of (C) or [i] of 3 of (C). If this is wave B of (B), then a substantial correction should be imminent with an expected low in January that retests the July low. No matter where we are in the wave structure, this is not the time to be buying stocks as a correction is long overdue. Better buying opportunities lie ahead at the low of wave 2 of (C), wave [ii] of 3 of (C), or wave C of (B). Regardless of how well or poorly you have traded this year, you can look forward to the continuation of wave (C) up, and the eventual decline to follow.

There will always be an opportunity. The main character trait needed to take advantage of the opportunities is patience.

Thursday, November 4, 2010

Dollar Rally Still In The Cards

The Dollar peaked on June 7 and has been in a steady decline every since with only one short rally. Has the stock market rally been nothing but a revaluation based on the Dollar? If so, a rally in the Dollar, particularly a 3rd of a 3rd wave rally, could be all that is needed to end the rally in stocks. The Dollar is at a potential turning point with multiple levels of support.

Small Degree Triangle On 5 Min Charts

A symmetrical triangle has formed on the 5 minute charts of the stock indexes, which indicates a probable continuation of the rally into the close today. This does not bode well for tomorrow as a close at the high on Thursday usually means a selloff on Friday. In my opinion, this is it for the bears. Either the market tops here by tomorrow morning or it's over for the intermedate term bearish case. This is the uncle point I talked about as being analogous to silver. We are at the uncle point. It really doesn't matter what your elliott wave count is, higher prices just will not fit a probable bearish interpretation.

For an expanded flat correction, 1.382 x wave A (April high to July low) = 12.27 + 41.77 (July low) = 54.04 = maximum probable price for wave B. While it has been seen in some expanded flats that wave B = 1.618 x wave A, it is rare for the stock indexes. If we count the Dow's rise to October 2007 as an expanded flat, wave b was 1.54 x wave a, but this is a rare case. Let's see what happens this afternoon and tomorrow morning. I am looking for a reversal, but after that I will be squarely in the bullish camp.

Qs At Upper Channel Resistance

The upper 50 day by 5.0 Keltner channel stands at 53.41 as of yesteday. The Qs are bid at 53.49 this morning. The next resistance level based on the January Range is 54.66. I cannot find a single instance since 2000 when a top was not seen within 7 trading days after the upper 5.0 Keltner channel was touched. The rally is now 47 trading days long. The April rally topped at 54 trading days while the decline lasted 47 trading days.

The impending top need not be THE top for this rally. It could be a 3rd wave top , but consider the same chart from the 2007 top. We saw 53 trading days and 10.68 points followed by a dramatic 8 day selloff.

It could be different this time, but what is the likelihood that it will be? The risk in this market is high in my opinion.

Tuesday, November 2, 2010

Significant Resistance Dead Ahead

I don't know how the market will react to the election results tomorrow or to the Fed, but I do know that the Qs have reached a very significant resistance zone at the 1.618 extension of the January Range above the January high. Just to point out how important this level is, the low in 2008 was just a little below the 1.618 extension of the 2008 JR below the 2008 January low, a very dramatic year to say the least. In 2009, the Qs moved 4.0 times the 2009 JR, but that was an exceptional year as was 1999. Of course the market can extend higher, but a number of factors seem to be lining up at this resistance level. We'll see very soon whether it is respected or not.

Another New High For The Qs Today

The pre-market action this morning has confirmed that yesterday's decline was a 3 wave affair and likely wave (iv) of [5] of C of (C) up. The upper limit for wave (v) to invalidate the ending diagonal triangle is now 54.31. I don't think 54.31 will be seen, but a new high is definitely probable. Even so, it is a last gasp as the market runs up into the election and Fed news - not exactly a recipe for upside. Absolute Breadth fell to 18.22 yesterday, almost a 3+ year low. This indicates that the rally has become extremely narrow. NYSE new highs minus new lows stood at 181 yesterday, well below the October peak around 400 and the April peak at almost 650. This is typical action for B waves. We will see by January if that proves to be the case.

Monday, November 1, 2010

QQQQ Topping Signals Accumulate

A retest of the April high could be seen this week. How it reacts at that level will be revealing.