Thursday, January 14, 2010
Make or Break Time for the Bears
Quite an unusual couple days for the stock market. It seems like the bulls should be tearing apart the bears here as they are virtually non-existent, yet the market just barely floats higher. Perhaps all the bulls have already invested what they've wanted to invest and now it's just a matter of time before the bears get out of hibernation and smack this market back down to reality. The wave structure does tell us that it's make or break time for the bears to wake up. The Russell and NDX did not make new highs today as you can see from the attached charts, but the S&P did make a new high and both the NDX and Russell are basically completely out of room to push any higher. If they do make new highs, it will mean the bears have to sit back and let this rally run its course until the next bearish signs resurface. One thing that gives me pause as to how much further, and longer, the rally would go is that the S&P made a new high today with a 5 wave rally. Normally we interpret that as the trend now being up. But in the case when we're looking for a major top, a 5 wave rally to a new high may mean that it's the final impulse move before reversing sharply. Tomorrow is options expiration day so perhaps we'll see some volatility so we may get the answer to the short term bull/bear question soon.
The bottom line is that as long as the NDX and Russell stay beneath their highs shown in my attached charts, I remain short term bearish. A break of those highs would only point me towards the S&P's 5 wave rally and keep me on the lookout for a quick reversal of the ensuing rally. Any signs of top and reversal would get me back short again. I'll try to post that here as soon as possible once I determine it if it's not too late. I would definitely not get long at all in this period as it's possible that a major top is forming right now. Be ready.
The EUR/USD did nothing and I have nothing new to add. If the stock market is about to form a major top and reverse sharply, it should take the EUR/USD down with it in a wave 5. But if the stock market continues to rally then the EUR/USD has probably already completed its first wave down and has been in a prolonged large wave 2.
Hopefully some more clarity will come tomorrow in all the markets.
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.