S&P Cash With Clear 5 Wave Drop; Jan. 9, 2009

The 15min S&P cash chart above shows the index traced out a nice clear 5 wave decline. This is not the case for the Dow and Nasdaqs, but with the overwhelming evidence that a top is in, the S&P's five wave drop is worth noting.

With 5 waves down, a correction should occur, that can take the index to the 915-925 area before the next decline phase gets underway.

Again, a major top looks to be in place at the high of 943 which will lead to the market dropping below 740 in the next few weeks/months. I'm positioned accordingly.

Major Decline Phase Underway; Jan. 9, 2009

I'm quite certain the next major decline phase is underway and the S&P's cash high of 943 should not be exceeded before 2008's low of 740 is broken first. But most likely it won't be an easy road to get there. Normally when there are major tops and then a decline, the masses are in denial that a top is in so they soon fiercely buy up the decline. This is what wave 2 psychology is made up of. But the rally does not make a new high and the bulls give up which gives way to a wave 3 down. We've lost over 50 S&P points so far so a sharp corrective rally is possible, but not required.

Bottom line: the next major decline phase is underway that should take the S&P below 740 before any significant bottom is formed.

S&P Futures Traced Out Five Waves Down; Jan. 8, 2009

Above is a 15min S&P futures chart that shows the decline this week tracing out a nice 5 wave pattern. With 5 waves down it tells us two things: 1) the larger degree trend is now down; and 2) a correction is due. So I expect a sharp wave 2 rally soon which will not make a new high on the week before it rolls over and sells off sharply again.

Significant Multi-Month Market Top Probably in at Yesterday's High; Jan. 7, 2009

A significant market top is probably in as of yesterday's highs. The highs of yesterday should not be exceeded for quite some time, and last year's S&P low of 740 should be broken before that occurs. The market should be charging significantly lower in the coming weeks, possibly months! Notice in the above S&P daily futures chart that yesterday's reversal and today's big down day formed a classic bearish reversal candlestick formation. Also notice that the MACD is showing a bearish divergence from the latest high and is now trying to cross down. Plus, today's market breadth was very very weak, and the VIX is at levels not seen in months telling us that the right complacency and over-optimism is back in the market making it primed for another big fall.

Bottom line: I strongly feel that yesterday's cash S&P high of 943 marks a significant top that won't be broken until last year's low of 740 is broken first. I'm heavily short.

Market Rally Waning; Jan. 6, 2009

The market rally is weakening heavily as indicated from several momentum indicators, telling us that this rally is nearing its end. But with that said, NYSE breadth is still quite solid today, telling me that we may see a strong quick push higher before a significant top is formed. That will again present another good shorting opportunity. Once the market tops, the S&P should fall quickly to the low 800s, and possibly much much further.

Bottom line: the market rally is ending and I'm shorting heavily on any rallies from here.

Gold Dropping in 5 Waves; Jan. 6, 2009

Above is a 30min gold futures chart from this morning showing what looks like two 5 wave declines. Also, the EUR/USD has dropped below a strong support level indicating that gold and silver's next declining phase is underway. My gold target is in the low $600 area.

Market Falls, But There's Still Underlying Strength; Jan. 5, 2009

The market is down today with the Dow leading the way with the biggest losses. However NYSE breadth is actually positive with more up volume than down volume and the advancers outpace the decliners. This is bullish. Plus, several sectors are actually up today with energy being the biggest gainer. So as it stands now, this does not look like any significant declining phase beginning, but rather just a pause in the uptrend towards the 950-1000 area.

The Rally Looks Very Corrective; Jan. 3, 2009

The rally from early last month looks very corrective and is waning in underlying strength already. Although it appears the market will continue to rally in the coming days into the 950-1000 S&P range, it can fall at any time, and it should fall hard when it does. With that in mind, I'd rather just short rallies instead of trying to get long this market and against the larger trend, which I see as down still.