Friday, January 15, 2010
Sell Off in 5 Waves, but Beware of Another Fakeout
The market had some follow-through to the downside around mid-trading day, but at the close it found quite a strong bid to higher levels. This is the same behavior we've seen in past sell offs where the major selling occurs in one day, but is bought up at the close and then maybe another down day and then rally to new highs. I'm not saying this is happening here at all, as you can see it's possible on the attached Dow 5 minute chart to count the decline as a 5 wave affair. But I'd like to see a break away from the usually decline patterns before getting excited about a major top being in.
Next week will be crucial. Like I said in my post this morning, we need continuation and acceleration. We didn't get that today as the action into the closing hour was firmly bullish, so we'll look to early next week for it. Watch the 10,571 level in the Dow and 1132 in the S&P. A break below both those levels will make the rise a correction at this point, and open the door to more heavy selling in the near future after that happens. Until then, we wait to see if this was just another sell off where bulls sell off on options expiration and reshuffle their positions only to buy the market up elsewhere to new highs in the coming days, OR if this is truly the big sell off so many of us have been waiting for.
With at least a short term top occurring as projected, and the sell off today in 5 waves down, the evidence supports the fact that the market should fall further into next week, and possibly much more.
Have a great long weekend!
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.