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Tuesday, November 16, 2010

Tuesday, After the Close!!!

The Summation Index is exploding to the downside as it has been accelerating over the last three days. If this trend continues the 4th wave option on the SPX is dust as the SPX will be entering a longer-term down trend, not just a correction.
The VIX has finally done something that has been evading it for so long, making a higher high, next resistance is the 200 day MA at $23.38.
The Dollar had an awesome day closing up .82% after running up and touching the upper channel line, this is now at a major cross-roads where the Dollar can continue the shorter-term trend and break above the channel line moving the longer-term trend bullish, or reverse back down keeping the channel line as resistance and leaving the trend in limbo.
The SPX also bounced down and touched Fib fan support, just like the Dollar, this provides a spot for a reversal.
The Russell chart is interesting because it has a different set of channel lines with the lower one still support so a bounce around this level would not be out of the norm. BTW, small caps led the markets down today with the Russell down 2.03%, while the SPX was only down 1.62%.
WOW, what a day, I was expecting a sell-off but the extreme internals even surprised me and really puts the double zig-zag count in jeopardy. Breadth closed at 6.50:1, decliners, well off of the highs during the day that where approaching 17:1. Volume was also heavy at 1.35B shares traded on the NYSE, and down volume accounted for 93.26% of the total volume. These are not numbers normally seen for a 4th wave correction of this degree, in fact I can not remember any 4th wave having these extremes, suggesting that we might be looking at a larger down trend, the 1-2, 1-2 down that I have been keeping on the radar over the last couple of days is gaining higher probability.
The Dollar chart along with the Fib fan and the Russell chart posted above do give some credence to a bounce here for the SPX so the double zig-zag does still have some legs, but the SPX would need to rally tomorrow because any more follow-through to the downside is going to really up the odds for the bearish count. The 4th wave does stay viable until the SPX enters into the price territory of the 1st down at 1129.24. The next major level of support for the SPX is from the 50 day MA which closed at 1165.35 today with resistance at 1190.87 from the 200 week MA and above that would be the 20 day MA at 1196.46.
The trend does continue down as long as the SPX keeps printing lower lows with the next test at 1171.70 followed by 1159.71. At 1155 the SPX has retraced 38%, another level where bounces are common, so this is also worth keeping an eye on for the corrective count.

3 comments:

  1. I look at your posts most days, just wanted to say thanks for the great analysis. I do hope the 4th wave/5th wave up doesn't transpire, a nice healthy crash to sub 1000 would be ideal.

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