Monday, November 16, 2009
Short Term Wave Count Suggests Some Degree of Top Approaching Very Soon
Friday I posted my primary short term S&P cash count (see post here) showing an a-b-c correction and a big rally about to occur. My alternate count was bearish, but required a break of 1085 to put it as my primary count, which didn't happen. Today the market played out the primary count's objective and rallied sharply higher. As you can see from my update chart today, I'm counting the 4th wave as a "flat correction", meaning we have one more rally leg for wave 5, and to complete the rise from 1085. 5th waves are tricky and often don't unravel perfectly, so it's possible with today's late session weakness that this 5th wave is already complete, and top at some degree is in already. Either way, I've closed my short term call options at a profit anyway. Early tomorrow we should know if a top at some degree is in, or if we have one more pop before doing so.
Internals today were very strong and up volume was very strong at 87% of total NYSE volume. The Russell surged and broke last week's high, but not the daily key daily high illustrated in prior posts. The XLF on the other hand, is lagging big time, and is showing signs that it's in its bear market wave 3 or C already. After falling in 5 waves late last week, the XLF rallied to the fibonacci 78.6% retracement level today then sold off sharply late in today's session. It did not follow the other main indices in a new high from last week. More evidence that this market is struggling to pull "everyone" higher to new highs as I discussed in this weekend's post (click here for post).
As long as these divergences on various time frames and with various indices/sectors remain in place, my conclusion is that we are in a major topping process in the stock market that will result an a huge and powerful wave 3 or C decline lasting several months at least. Right now I don't see any signs of a top yet so I can't become short term bearish at this point, so I remain neutral in the short term until evidence of a top presents itself. But with the short term wave count in its final stages, it appears some degree of top is fast approaching.
PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.