Thursday, May 14, 2009

S&P Should Continue to Weaken Before Final Rally of the Year; May 14, 2009

I am not trading aggressively or short term so my posts have not been as frequent because I'm playing the longer term picture which is show in the above daily S&P futures chart. The rally that started early March is almost a straight line but can easily be counted as a 3 wave advance. It's much too small in price and time for me to strongly consider the major rally over and the big wave 3 or C down underway right now. If it is a 3 wave rally, and wave 3 or C down is not underway right now, then it leaves two top counts:

1) a flat correction (wave A rallies in 3 waves) where wave B will come down and test the March low of 665.75 S&P futures and then rally in wave C just above May's high of 929.50 before a major top is in.

2) a combination is forming, i.e. A-B-C X A-B-C. The decline we're in now would be the "X" wave.

Whether we're in a B wave or an X wave to me is irrelevant at this time. Both wave are the hardest waves in EWP to count. What I do know by using other technical indicators and internal strength data of the market is that a top at some degree has most likely formed at 929.50 and a decline of a decent magnitude is underway. I continue to short the S&P using the double inverse ETF in the SDS and selling call options to collect premium as I play the longer term action.

The real opportunity will come if I can see the another bottom forming and the final last rally of the year which should push to the 1067 S&P level before topping and the opportunity of a lifetime presents itself with a major major major shorting opportunity with a risk/reward ratio that won't be seen for another 70+ years!

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