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Tuesday, June 8, 2010

Tuesday updates

The SPX did manage to close inside the most bearish part of the blue Fib fans, but it regained the support of the green, bullish fan.
**I plan on posting more TA charts later today as soon as Stockcharts gets their daily charts updated!!!
Both Bearish counts are still alive and well, but in order to up the odds for the more bearish 1-2, 1-2 count, we really need to see the breadth and volume explode higher during this next sell-off, because at this point, both have been decreasing since the very 1st wave down, something that should not be happening for the start of a 3rd wave down. And in order to keep the Leading Diaganol count alive, we must break that low of 1040.78 for the 5th wave.

After the close, All those over-lapping waves for the last few days, have been very frustrating to work with, but hopefully, this move up today clarifies the micro-counts. We finally have a decent correction to work with to get the counts cleaned-up leaving only one option, a 2nd wave retrace. The SPX never did break below the old May 25th low, but lots of other indexes did, resulting in the Bullish corrective a-b-c count from the top, back at the end of April being invalidated, since those indexes now have more then three distinct waves in them.
If this is a 2nd wave retrace going on, and it is my odds on favorite, then 1066-80 would be the range I would expect for the 2nd wave to wrap-up at, then we can get going on that 3rd wave down.
Upside resistance starts at 1069.01, where the last minor high was, then next up would be that trendline from the very top, at around the 1095 level, a major high at 1105.67, and with the 200 day at 1107.16, that is a lot of resistance for the Bulls to fight thru. Since very few 2nd waves retrace more then 62%, any break above 1080, should be a fair warning to the bears that they are at serious risk of losing the ball, and the downtrend.
Breadth for the day ended at a very boring, 1.50:1. One good thing the bears do have going for them, is this mini-rally will relieve the shorter-term over-conditions, and allow more room for further downside, as you can see in the above chart the RSI is quickly approaching the highs back on June 3rd, yet the price action is NO where close to approaching its high of the same day, same with the STO.
Click here for a live, and updated chart!!!
7:16, The SPX still has not made that lower low that the Russell did first thing this morning, breaking below the May 25th low. One problem for the bears, the RSI is showing divergence now, so it either the RSI needs to make a lower low, or odds are going to favor a short-term rally in the SPX here soon.
***FWIW, Just in case you did not know, I am constantly updating the above chart during the trading day as events unfold, that is why I have that link there, so you can always get the freshest look at whats happening. Click here for a live, and updated chart!!!
7:10, The Russell managed to make a new low today, breaking below the old low from May 25th.


  1. What probability do you place on this being a leading diagonal - with this correction being a b wave and a final 5 down for a zigzag to make the completed structure intermediate wave 1 down and then a retrace back up to 1120-1140?

  2. Tom, 50/50, although I do not like this being counted as a "B" wave, because the 3rd wave down was a clear impulse, 5 count wave, so the final 5th wave should also be an impulse, (5-3-5-3-5 count), but the reason I do like the LD count is the RSI seems to favor it. We shall see here soon, I am waiting for some extreme readings for the next wave down, that should really help with which count wins!!!

  3. thx - 1 more question: could the RSI divergence just be the final set up for the final minutte wave 2 vs the LD 5th wave - just any thoughts on this

  4. Why a leading diagonal? Whole thing could be a downwards sloping triangle B wave - a flag or pennant with much higher highs to come.

  5. David, Might be, but right now I know of NO corrective count, that would be valid, and completed, for a "B" wave. So why not a i-2, 1-2, down, or a LD?

    Tom, yes, it could.