Tuesday, October 20, 2009

Bearish Signals Paid Off, Market Not Impressed with Apple/Texas Ins.

Late last night I saw that Apple and Texas Instruments were rallying due to earnings "blowouts" and wanted to make sure people had a proper perspective of the overall market and what's going on, so I posted that late update showing the Tech companies who all declined after earnings postings. Apple and Texas Instruments should follow suit. The overall market though was not impressed and the bearish signs I warned about the past few days are now taking effect. We'll see if this decline has legs and can build momentum. I want to see 4 things in order for this decline to hint to us that it's possibly part of a bigger decline (wave 3 or C), and not just another 2-3 day selloff before new highs are acheived. I want to see:

1) 5 wave declines to show that the larger trend is in fact down, and intact.
2) NYSE breadth and volume to remain very weak, showing that the bears have control.
3) The EUR/USD needs to break 1.4820 to suggest it has formed a top (US dollar bottom).
4) As the market falls, most of the media and market analysts talk about "buying the dip" and talking about what levels they will buy at. In other words, I want the masses to be buying on the way down. Without optimism on the decline, it won't last.

Above you can the S&P cash 5min chart that shows a nice 5 waves down, following the XLF which completed 5 waves down yesterday as I stated in a previous post. Also view the other chart, it shows a potential expanding decline suggesting a lot of violence and conviction in the decline. More importantly, this is what the market looked like before the previous wave 3 started in October.

So it's an interesting morning. We'll see what happens the rest of the day.

I also wanted to let everyone know that I wanted to get long the US dollar because I feel it's forming a major bottom so I went long the USD/CHF and will go short the EUR/USD on a break of 1.4820. More details on currencies later.

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