Friday, March 19, 2010

Market Fractured, Reverses Impulsively









Yesterday I said 1168 in the S&P was key to the bearish case, and even if it was broken I'd still be looking for a top and reversal after 1170 was broken. Well I didn't account for any inter-market divergence to occur where one index may make a new high while the S&P did not. As you can see from charts above, the Dow and Nasdaq 100 both surged to new highs, however the S&P and Nasdaq Composite did not. All the indices have recently declined in a nice sharp 5 wave pattern. The fact that not all indices made new highs and that the current decline is an impulse move, it suggests the larger trend must be down. The only thing that gives me concern is the very corrective looking decline in the S&P and Composite. They look more like ABC corrections with a wave C occuring this morning for that 5 wave decline. Nothing's perfect and we have to play the probabilities. But I wanted to post an update here because as it stood yesterday, 1168 was key to the bearish case, but seeing that the S&P and Composite couldn't follow the other indices to new highs may mean a top is in. The size and magnitude of that top will be revealed later today or early next week as this market action unfolds. I'd be carefully looking to short this market on any bounce as long as risk was very tolerable on the trade. The action throughout the day and next week will really shine some light on the larger trend.


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.

6 comments:

moola said...

I am watching for DOW,NASDAQ and S&P 500 to drop to the recent lower lows:10708,2366.23 and 1153.75 to conform the down trend. What are your thoughts.

Todd said...

Tough to say at this point. I'd like to see unrelenting 5 wave drops, but it's not a perfect world. A close beneath 1160 would be a good start, and if it does so, it will eliminate that "buy the dip" mentality that has accompanied the market the past few weeks.

Todd

apartofny said...

Cramer Versus Prechter, Bull market or Bear... http://www.apartofny.com/2010/03/cramer-vs-prechter-from-an-elliott-wave-perspective/

Anonymous said...

Good point about eliminating the the buy the dip mentality. Now lets see if the system finally has the gap and go Monday finally worked out of it. I think the two go together.

Todd said...

A Part of NY,

Nice work on Prechter v Cramer. Thanks for posting.

Todd

Todd said...

Yes that would be nice. I want to see price destruction and clear EWP structure before I call another top.

Todd

StatCounter