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Thursday, July 1, 2010

Thursday updates

After the close, The SPX continues to stair-step lower, making another important lower low today when it took out the old low of 1019.95 made back in the beginning of October '09, but then bounced very close to the 38.2% (1008.55) retracement level from the top. As of now, the shorter-term counts are getting cloudy as there are at least three different ways to interpret the last weeks squiggles count, so for now, the size of the correction we started today will help clarify the count. The one option I left off of the chart is that we are presently working in a 4th wave.
My primary count needs to sell-off first thing in the morning because the size of this 2nd wave is starting to get too large, compared with the size of the previous 2nd wave retrace which is one size larger in terms of degrees. If the market stays flat tomorrow, the 3rd option of the 4th wave scenario will be most likely, and if we rally hard towards 1060, the optional count on the above chart will start to stand out as most likely. Any strong sell-off tomorrow could create the "Death Cross" as the 50 day MA crosses over the 200 day MA, a signal that is used by many long-term investors looking for the larger trend.
Breadth for the day ended at 1.53:1, decliners, no surprises there as the market only closed down .32%, a flat day that ended with some consolidation of over-lapping corrective waves.
1048.08 is the first level of resistance for a trend change, and breaking above would be making a minor higher high, 1083.56, would be a major high, and most likely would signal a major trend change to the upside, but the SPX would have to first clear resistance from the 20 day MA at 1079.47.
On the down side, there is not much left besides older lows, as the SPX is already below all the major Moving Averages, and there are no trend lines left to act as support. There is a major band of support in the 869- 956 range where the SPX spend close to three months bouncing around before breaking higher last year.
The Trend Finder still has 8 sell signals, with no buy signals showing, leaving the trend at 100% bearish.
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10:57, The SPX has now retraced far enough that the only way to keep the primary count going is to add another set of 1-2's, and I know that is pushing the limits when it comes to the number of 1-2's stacked together, the other possibility is my optional count, were we would retrace back up towards the 1050 level.

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9:10, Watch that gap, if it does get filled, the optional count comes into play, with this count, which is for now is my primary count, the SPX has NO business up around that gap. With the optional count, that is a full 5 waves down, instead of the 1-2, 1-2, would be completed, and a retracement to fill that gap would be expected. So far, the Breadth, which is currently only running 5:1, is not making me feel 100% confident on the above count, it needs to get up towards that 15:1 level if we are truly in a 3rd wave down. In the chart below, you can see how the optional count would fit in as we would be working on that second wave 2 retrace.

7:52, October's low of 1019.95 got taken out this morning, next support on this chart is the 38% retracement level of 1008.55, followed by Septembers low of 991.97, needless to say, that the trend is down, as the SPX continues to make major lower lows!!!!

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7:39, Things are turning even more bearish as the SPX was able to break down into a more bearish set of Fib fans, now downside support is around the 1000 level

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7:28, The 1-2, 1-2, 1-2, count is still my primary count, but I am watching for any quick reversal that would support the optional count, that the 5th was put in, the trendline break does support the primary count as the selling is accelerating now to the downside, and any break below 999.70 would void the optional count, as it would make the 3rd wave, the shortest.