Market Finished up Wave ii This Afternoon, or Should do so Early Next Week

TOP WAVE COUNT




Above is a 5min chart of the S&P cash index. The failure of the market to selloff sharply by breaking through 1170 led to a rally in the second half of the trading day. This makes me feel that the flat correction count I mentioned yesterday is unfolding. The smaller waves within wave 'c' of ii do not appear complete though, and yet the market got pretty volatile and sold off a bit into the close. So perhaps wave ii is over. In addition, the financials were on fire today, up close to 3%, and despite the bullish reversal this morning and large volume seen today, the indices ended the session mixed-to-flat on the day. This is bearish in my view and would suggest more selling early Monday morning. The bulls just can't get any momentum. And the fact that wave 'c' could not make it above the wave 'a' high, like in most flat corrections, it tells me that there is extreme weakness in the market if it can't even adequately complete its corrective pattern. The problem with this scenario is that if there is extreme weakness in the markets as the wave count suggests, then I'd expect to see noticable divergences between other indices when this happens, and today there weren't any of significance. Also, the XLF looks like it has a few more waves upward to complete its correction as well. So lets look at the even shorter term and get a close up of what we can expect early next week.


CLOSEUP OF THE LAST TWO DAYS OF TRADING




If wave 'c' of ii is over, then wave iii of 3 of [3] or C is underway and should move down in a hurry on Monday according to this setup. If not, then wave 'c' of ii is not over, and the S&P may push up to the 1100-1110 area I previously cited before wave 'c' of ii tops and reverses. The key for the bears remains the 1131 level. As long as that level holds, I'm bearish.


FINANCIALS (XLF)




Above is a chart I thought was interesting since its wave structure looks quite clear. The financials' rally today fits well with a wave iii of c of ii. The current count suggests a little more upside before completing the correction and then reversing much lower. I'm not sure of the larger wave count as the waves in this sector overlap quite a bit on the daily chart. But the short term picture traced out a nice 5 wave decline as shown above, and in accordance with the major indices, it appears the XLF should also be on the verge of a major decline.

So Monday we should see a heavy selloff across the board in a wave iii of 3 of [3] or C, or we might get a push to the 1100-1110 area in the S&P cash index before topping and then selling off sharply.


POSSIBLE INVERSE HEAD AND SHOULDERS PATTERN




Lastly, I just wanted to point out the fact that the market conveniently closed right at the base of what could be the left shoulder of an inverse head and shoulders pattern. So this could mean we'll get a sharp shot upward Monday morning. But as I said earlier, all it would mean is that wave 'c' of ii is continuing into the 1100-1110 range and that it's just the final move of a correction before massive selling commences. Keep in mind that ever since the June 21 top, rally attempts have been hard faught and have failed usually by the end of the day. So a sharp shot higher on Monday may just lead to more of the same. Until the bulls are able to sustain their gains and get real momentum behind their moves, and especially take out 1131, then I'm still firmly bearish.


PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

S&P Trying to Get Through 1070. (Notes for the Very Short Term)

The S&P has a minor support shelf at the 1070 level and it's having a hard time breaking through it at the moment. The decline has been far from jaw-dropping as I'd expect from a wave 3 at multiple degrees so I'm cautiously bearish at this point. I just wanted to point out the 1070 level since a break through it should lead to a quick move to the 1040 area. A break through 1040 should lead to an acceleration of aggressive selling well into the 900s. If the S&P fails to break below 1070, the bulls may get emboldened and push the index to the 1100-1110 area to complete the flat correction I mentioned yesterday. But from there, we should get more selling to new lows and 1070 should be nothing more than a speed bump for a market headed much much lower. 1131 remains key for the bears to maintain.


PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

1085 Taken Out Decisively, Advantage Bears

S&P Cash Index Daily Chart




Above is a daily S&P cash chart showing the bigger picture we're watching. We see that there's a high probability of a significant reversal of trend this past Monday as the market reversed sharply into the close creating a bearish reversal candlestick. What's more notable is that it did so at the 50% fibonacci retracement level. The market opened right on that level, then rallied, reversed and then closed firmly below it. So the daily chart suggests a larger trend reversal occurred on Monday and that further selling is ahead.


Internals




Internals today were fairly weak with NYSE downside volume closing at 91%, and 75% of NYSE stocks closing down on the day. This is not as weak as yesterday, but as you will see in my wave counts below, today's action probably represents a 5th wave which is usually accompanied by diverging momentum relative to that of the previous wave 3. So things are well in line in that respect. Another internal aspect that might become an issue later on is the fact that volume still remains less than stellar on this decline. Although today's NYSE volume did kiss the 13 moving average, I'd like to see bigger volume numbers coming in on this decline quickly. The size of down volume, total decliners and total volume will become more and more important as the days go on. If this is a wave 3 at various degrees, then all these things should be increasing.


Bear Wave Count 1




Today's push made it decisively below the key 1085 level I mentioned yesterday, and then even closed strong well beneath it. This action eliminates yesterday's potential bullish count that had the entire decline from 1131 as a 3 wave corrective affair. The bears appear to be in firm control now. And now that we have 5 waves down from the 1131 high, the bears can comfortably place stops just above 1131 in my opinion.

Above is one of my two top interpretations of the short term wave structure. Although we have a 5 wave decline already, it could be useful to recognize what any bounce may imply if it comes in the future since it can bring about a great trade for the bears with a stop just above 1131. The count above has us in an extended 5th wave which means that very small wave [iii] got underway at the close and should continue down sharply into tomorrow's open. That should be followed by a flat wave [iv] rally that should stop short of 1074.63 before falling to one more new low to complete wave [v] of v. of (i) of 3 of [3] or C. So if that type of behavior occurs tomorrow, then we'll have our only top count above.


Bear Wave Count 1




The other top count I'm watching is that of a flat correction shown above. Today's late day decline represents wave 'b' of a "flat correction". And with the strong momentum at the end of the day to the downside, I wouldn't be surprised to see another pop lower in the morning. But under this wave count it would mean that a sharp wave 'c' rally would then quickly occur to finish off wave ii.

So these are the two counts I'm watching. The first one has us in an extended 5th wave which should result in more heavy selling tomorrow and perhaps flooding over into next week. The second wave count might result in a rally right at the open for wave "c" of ii, or maybe a short pop lower and then the wave 'c' of ii rally. Either way, the larger trend remains down and any rally would seem to be a good opportunity to get short with stops above 1131.



PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

Bears Need to Take out 1085 Before Bulls Take out 1108

BEARISH COUNT




The market did nothing today, other than reverse a sharp rally surrounding the Fed announcement. The bulls are having a real tough time getting any momentum, or holding gains, so it aligns well with the trend being to the downside right now as projected. Above is one of two counts I'm watching right now. The decline counts well in the short term as a 1-2-3-4, with a wave 5 occurring on a break of 1085. Without a break of 1085, it will leave the decline vulnerable to being a 3 wave drop, which is a correction, and meaning it will make new highs soon after. This will become increasingly likely if the market goes above 1108 (the wave 1 low) before breaking below 1085. So breaking below 1085 is key for the bears at this point. Once the market does this, it will be very likely that a large decline phase is underway, and with it quite possible the decline is a 3rd wave at various degrees, it would make it a great trading opportunity with a stop just above 1131.


BULLISH COUNT




The fact that the market has not completed a 5 wave drop yet, and more importantly that there seems to be a clear triangle in the middle of the decline, make me hold this count above in equal probability as the first one I posted. If we only looked at a small window of time, and did not anticipate what might happen in the future, then this count would be the primary one since we have only a 3 wave drop with a clear triangle in the middle. Triangles can only occur in B, X and 4th waves, and a B wave would fit best here. A break above 1108 before going below 1085 would put this count as top choice. However a break below 1085 would make this count very unlikely, and put the bearish count up top as my primary choice. The breakdown of 1085 is key for the bears.


INTERNALS




Lastly, and briefly, I just wanted to further illustrate the market's "laboring" the past few days that has continued today. The market rallied strong midday but then reversed into the close, a theme all week. Also, as you can see above, the internals of the market were negative today as well. The bulls are having a tough time getting their legs under this market. So the advantage is to the bears, and as long as the bears successfully defend 1108 and take out 1085 soon, the bears will have a VERY firm advantage. We also need to see volume increase on the next leg down. Right now volume has been quite muted.


PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

The Market Should be at the Start of a Very Aggressive Decline Phase

The market continued to the downside after its big reversal yesterday which is well in line with a wave 2 top. The market looks to be declining impulsively in nice smooth downward waves. A reliable count should develop in a day or two and I'll post the short term count here. Today's decline not only followed a big reversal day with impulsive-like action, but it did so with massive selling volume compared to up volume with down volume representing 92.5% of the total volume today, there were only 21 S&P stocks that closed up, and there were almost 4 decliners for every 1 advancer on the NYSE. The only kink in the armor for the bears is that today's volume was nothing to be impressed about as it held way below its 13 moving average on the NYSE. But that may change tomorrow. We should see increased volume on declines if the above wave count is correct.

I've adjusted the count to have us in a wave 3 of [3] or C, but it may change to a wave (iii) of 3 of [3] or C if the structure dictates. Right now the count I have above does not have EWP's "right look" in my view since wave (ii) is so much small than wave (iv). But it violates no rules so it does remain valid. And my other count would have its wave (ii) being quite long in time and price to be part of a wave 3 of [3] or C, so that one is suspect as well. Regardless of which of the two counts are correct, the market should be under tremendous selling pressure in the coming days. Without impulsive action to the downside on strong volume in the coming days, this above count may become vulnerable. Look for heavy selling, whether it be methodical like today, or a panic sharp shot downward. The market's larger trend right now should be decisively down. Otherwise some other structure is unfolding that I haven't listed yet. I would recommend watching the market's closely and being active in it right now. Opportunities like the one we MIGHT have right now are extremely rare.


PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

Wave (iii) May Have Started Today

I've been moving to another place the past few days and haven't had internet or cable access. Tonight I'm finally up and running and saw what the market did today and am quite pleased as a bear. I'm sorry I can't post a count or chart right now but will try to do so tomorrow morning if I can. The market rallied in a 3 wave (abc) structure for wave (ii) of 3 of [3] or C. It made a clear 5 wave pattern for wave C and reversed after just breeching the 62% fibonacci level and has found support at a minor support shelf around 1106. If this is a wave 3 at multiple degrees like I suspect it might be, then there should be little mistake about it. The market has been practically churning sideways for the past few weeks. If we're in the wave 3s that us wavers are looking for, then the market needs to get going to the downside and start acting like wave 3s. I expect heavy selling tomorrow, otherwise wave (ii) probably has a little further to go.

I'll do my best to post more thorough updates with charts as the week goes on and I get more free time.