Thursday, September 11, 2008
Sept. 11, 2008; Corrective Rally Ending
The market rallied after completing five waves down just like I stated earlier this morning (see previous post below). The corrective rally has satisfied all the requirements to be complete, so the next wave of heavy selling can commence at any time. Most likely tomorrow. Today's huge surge the last 30 minutes into the close was done with momentum indicators barely moving up at all, and a strong bearish divergence is building on the smaller time frames which should build into the larger time frames if the rally continues tomorrow. Also, the Dow rallied almost 200 points, but NYSE up volume was only 64.6%; decliners actually exceeded advancers so despite the market rallying almost 200 points there were more declining stocks than advancing stocks; and the NYSE was up only 0.68% today. This is not a strong rally internally. So again, rallies are accompanied by a weak demand to buy stocks, while selloffs are accompanied by a strong demand to sell stocks. When you combine this with the constant 5 wave declines I'm seeing, it tells us the larger trend is still down. And the building pressure of this choppy market should lead to explosion to the downside.
The key level is the top of the 5 wave rally in the S&P at 1274. As long as that remains intact, the proposed wave 3 of (3) down is underway. A break of that level will lead to a re-examination as to what exactly is transpiring. My guess is that the rally is over and tomorrow will be a big big down day. We'll see.
The chart above is the updated version of the S&P 15min timeframe that I posted in the prior post that shows the corrective rally complete and the next wave of heavy selling about to take place.