Bearish Reversals Confirmed, Some Degree of Top is in; September 23, 2009

Although too early to call for wave 3 to be underway definitively, when it's late in the rally and wave 3 can start any day and a big reversal and bearish day happens like it did today; you've gotta pay close attention.

The S&P, Dow, and Nasdaqs all closed well beneath their daily lows. The market's internals turned hugely bearish during the decline, saying that everyone was selling, and doing it ferociously. The EUR/USD closed right at the daily low at 1.4732, but has since broken well through that level and appears to have declined impulsively, suggesting a top in the EUR/USD has a high probability of being in right now.

The fact that the EUR/USD, and all the major stock indices made new highs today and rallied sharply on the Fed announcement, then reversed sharply to break and close beneath their daily lows (with the exception of the EUR/USD which closed on it), tells us that a significant top is in place and the market will decline further in the coming days. Obviously if these markets rally to new highs it will negate the short term bearish call, but until then I will be monitoring this decline very very closely to confirm whether or not wave 3 down is underway.

To sum up: today's market action was extremely bearish and strongly suggests that a top of high significance is in the market. Whether or not that top was that of wave 2 we'll have to wait to see the market's behavior and structure in the coming days. But right now, I'm very bearish all the major indices, and the EUR/USD (bullish the US dollar).