Thursday, June 25, 2009

On Verge of Massive Selloff; June 25, 2009

The market rallied into the Fed announcement but then sold off in the afternoon creating a nice bearish reversal day. Then the futures rallied to new highs in the Asian session overnight but then sold off once again in the European session and into this morning's US session. The selloff broke the low of wave X, labeled in the chart above. This overlapping nature of waves tells us that the rally is clearly corrective and that new lows on the week will be achieved. My wave count suggests that the market just completed a "combination" correction according to EWP which composed wave 2. If correct, it means a wave 3 within wave C is getting underway in the very near future. This of course means a massive selloff is on the horizon. I'm positioned accordingly with my short S&P mini futures contracts, bear put option spread on the SPY, and a covered call strategy on the SDS.

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