Tuesday, May 25, 2010
Is Today's Decline a 5th Wave as Forecast?
The market continued lower this morning, right on track with my two top counts posted yesterday, although the internal weakness of this market suggests the alternate count for a "flat correction" is most likely not valid anymore. The 2nd alternate (bullish) has been completely eliminated. The primary count suggests this current decline today is wave 'v' of '(i)'. But looking at the internals of the market I'm not so sure of that anymore. As you can see above, the NYSE has 92% of its stocks trading to the downside, 93.7% of volume to the downside, and only 14 stocks in the S&P 500 trading higher today. This is a very weak market, across the board selling, with the bears firmly in control. This is not typical of a 5th wave which should have more moderate internals that diverge from the very weak internals of wave 'iii'. Today's internals are more like a 3rd wave. It's POSSIBLE that what I have labeled as wave 'iv' is actually a wave 'ii' and we're in wave 'iii' right now. So that's something to consider.
The action of the market later today and into the close will be important. If the market can rally back strongly and improve the above internals on solid volume then it's quite likely today's decline was in fact wave 'v' as charted above, and that a fairly large wave '(ii)' rally will be underway soon. If the market closes on, or near, its lows on the day then I might have to rework the count to make it much more aggressively bearish in the short term.
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.