Thursday, January 21, 2010
Stock Market on Track with Recent Projections; Look for 5th Wave to New Lows Soon
The stock market finally had some continuation and acceleration after an initial sell off. We haven't had that in a while. However this only leaves us with a 3 wave drop as you can see from the attached S&P chart. So we need to see at least a new low beneath today's in order to call the count complete for the short term, and to add further evidence that a major top is in. The VIX spiked big today creating a set up for a short term buy signal. Once the index closes beneath the upper bollinger band on a daily basis, the actual buy signal will be issued. So this sets up a couple scenarios for the bears:
1) the market will tank again tomorrow to new lows, completing the 5 wave drop from the highs earlier this week, and then reverse in a strong wave (ii) rally either late tomorrow or early next week causing the VIX to close beneath the bollinger band issuing a buy signal, and allowing for some more corrective rallying in the following days;
2) the market will just continue to fall off a cliff, causing the VIX to spike higher and higher to where it doesn't close back underneath the bollinger band for a long time.
The bad situation for the bears would be if the market does not make a new low and rallies enough to drop the VIX to close beneath the top bollinger band, leaving a 3 wave decline in the S&P and a short term buy signal issued. So tomorrow might prove to be quite important.
I see the S&P in a wave iv now, or just completed, and we're heading down in a wave v at the moment; or we'll have a pop rally early tomorrow morning to complete wave iv which will then quickly reverse to beneath today's lows. If the market pops in the morning, it can only be a wave iv by the count I have here if the market stays beneath the wave i low at 1129.25. So if the market does not break beneath today's lows and then rallies above 1129.25, then my count is wrong, and if the market rallies above 1141.58 then it will leave a 3 wave drop in the S&P and probably mean that new highs for the year are coming soon.
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.