Tuesday, June 23, 2009

Big Market Move Ahead, Trend Still Looks Strongly Down; June 23, 2009

The market did nothing today, probably a "wait-and-see" approach to the Federal Reserve meeting conclusion and public announcement coming out tomorrow late morning (PST). There are various ways to interpret the short term wave structure and outlook but I don't want to get too caught up in the minor ups and downs in the market because the important point for trading is that the larger trend appears to be firmly down still. I think the 880 S&P futures level might offer a good support level, although the wave structure suggests that this level might get blown away soon.

Today's sideways action can be interpreted as a triangle in the S&P and the Nasdaq composite. Triangles only occur in 4th waves and B waves. The current market conditions suggest a B wave which should be followed by a sharp thrust upward in a C wave. But triangle thrusts are terminal, or finishing, moves. So that rally will be quickly reversed and the downtrend will resume. The other scenario had today's sideways action as an actual correction where the small 5th wave labeled on the 2 hour S&P futures chart above is extending, or it's a wave 3 within C.

All of the 3 scenarios eventually lead to lower levels, and 2 of the 3 lead to sharp big moves to the downside. So I remain heavily short, ready for a brief sharp rally where I can add to those short positions.

I'm currently short Sept. S&P mini contracts, have a bear put option spread on the SPY, and a covered call option position on the SDS.

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