Thursday, July 31, 2008
July 31, 2008; Selloff Occurred, but Buyers Still Strong
A selloff occurred here in the morning tracing out a 5 wave decline (see chart). This would be very encouraging to the bearish case being underway now, but breadth is not weak enough as it should be if this wave 3 of (3) has started, and it's also very possible to count this recent decline today as a "flat correction" according to EWP. The 5 wave drop I labeled on the above S&P 3 minute chart would be wave C of the flat correction, signaling that the correction is over and a rally to new highs is coming. So we need the market to play out a little more.
The low of the day is 1271 in the S&P, and if the wave 3 of (3) decline I'm is underway now, I'd like to see that level broken to all but eliminate the posssible flat correction scenario. As long as 1271 remains intact, rallying to new highs is a high possibility.