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Thursday, February 25, 2010

Thursday updates

This is the Russell chart I have been talking about all day in the CiL, and posted on the blog right after the open. The sell-off for the past few days does not fit very well labeled as a 1-2, 1-2 on the Russell, buts fits perfectly as a wave 4, in terms of price, and time. One thing this sell-off has done is relieve the over-bought conditions and allowed room for the price to move up and finish the 5th wave. The Russell is also very close to making a higher high, and has retraced far more then what a second wave would normally retrace. It would only take a 3 point move to make a new high at this point. so this possibility is the most likely scenario in my opinion. Then we can get back to the bearish counts.
After the close, After a open that only a bear could love, things deteriorated quickly, as did the bearish 1-2, 1-2 down count, although we did not make a higher high today, the bearish count is in severe jeopardy. The majority of the day the SPX rallied back towards the opening bid, in what can be counted best as an impulse wave. Breadth also peaked right after the open, and declined as the day progressed closing at 1.0026:1, advancers on slightly increased volume. This is very troubling for the bearish count as these 1-2, 1-2's set-ups, that retrace back this far usually fail, and turn into corrective patterns.
We did manage to make a lower low today, and no higher highs, keeping the trend down, I would be very cautious in thinking the short-term trend will remain down after looking at the technicals. The wave 4, bullish option definitely has legs now.
Levels to watch tomorrow are 1106.42, for making a higher high, and invalidating the 1-2, down count, and 1086.02 for making a lower low, and keeping the direction of the trend down.
And just to throw a wrench into things, Blankfiend"s over at Fibs And Waves noted this morning, that the 4th wave entered the 1st wave on the NYSE!!!
7:08, This is the Russell chart with the 4th wave option that still fits just fine. It is possible that the Russell and the SPX have a slightly different count.

Click here for a live, and updated chart!!!
6:54, This is the bearish count, and breadth is doing a good job confirming the count, now running 6.83:1, decliners. The only word of caution, is that in the Russell, the wave 4 option does look possible.
Click here for an updated real time chart!!!
6:36, It did not take much to jump back into the most bearish part of the fan.
6:14, If the SPX cash, follows thru on the ES-minis, today we would have our top in, but as it stands right now, this could still be counted as a 4th wave, with higher highs for a 5th. A retrace after the open would support the 4th wave option, where as a contunied sell-off, with good breadth and a large increase in volume would would support the 1-2 down option. If this is indeed a 3rd wave down, it should leave little doubt by the end of the day.


  1. Nice analysis as usual. Sorry to be boring, but I'm still going for this being wave B of a large ABC to new highs (or a double top). If this is correct, there will be a huge short covering rally (wave C) starting next week.

  2. David I don't think there are enough shorts left to cause that huge covering rally you are expecting. Anybody who is significantly short now is a pro and won't be easily dislodged from their positions. I mean look at the VIX at barely 20 and the bullish percentage numbers rising! These represent an almost ideal shorting environment imho, with all due respect to the present wave theory uncertainties.

    If you are not short now (to some degree) there is unlikely to be a better opportunity until later in the summer. By the way I am not a day trader.

  3. Neither am I Hetty. I tend to take a main position for medium term (a few weeks) and a 'trading position' based on the outlook for the next week or two. You might be right with your outlook, but I'm afraid I must follow my own rules, which say we are in a very large ED (currently in wave C upwards) that will peak sometime between March and May in the 1200 area or higher. And might continue into August. I haven't seen anything yet to change my mind, although I obviously will do if the right signals emerge.

  4. col, you might be right with that bullish rut, euro's been up pretty strong all night and still hanging pretty tough, i guess we'll see ;-)