Friday, September 25, 2009

Similar Decline Structure Warns Aggressive Bears; September 25, 2009

As I said in my previous S&P post, the decline from Wed. is clean and healthy and with a 5 wave drop a rally is expected. 1076 futures and 1080 cash in the S&P remains the critical bearish levels for the short term bearish move. Although the decline is looking good for the bears, I just wanted to point out a potentially bullish development on the hourly S&P cash chart above. Notice that the past 2 declines sported the same type of structure that this current decline is undergoing (see yellow arrows). Each time the market tanked hard with weak breadth and advance/decline volume, but then just hit a floor and formed a "bowl" which led to sharp rallies to new highs. I'm only mentioning this to keep things balanced and to report them as I see them. Wave 3 down is NOT confirmed yet, and until it is caution is warranted against extreme aggressive bears, especially with the current "bowl" pattern that has formed.

Monday will prove to be a critical day. If the S&P, Dow and both Nasdaqs can make new lows beneath those established today, then it will put the wave 3 scenario up top to serious consideration. Until that happens, I'm cautiously bearish against 1076 S&P futures and 1080 S&P cash.

Today's lows that need to be broken to solidify the bearish case are:

Dow 9641
S&P 500 1041
Nasdaq Comp. 2085
Nasdaq 100 1690

If all four indices break today's lows early next week, the chances of "THE TOP" being in will significantly increase.

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