Sunday, May 23, 2010
Monday Pop, then a Drop
It's been an extremely busy week for me and I'll finally be back to posting the usual posts in a more timely manner starting Monday.
Friday was a wild day and had monster volume with the Dow closing up triple digits. On the surface it looks like the bulls put in a bottom and might be back in control. But Friday was options expiration, so the big volume number is probably just attributed to that instead of a rush of bulls coming into the market. And the big triple digit Dow rally came in the last 30 minutes of trading, more in line with options expiration, or short covering into the weekend, rather than a big bullish move also. The late day rally also lines up well with the current wave count above. It shows wave 'iii' ended and now at least an ABC rally for wave 'iv' is now underway, if it didn't already finish on Friday. Despite that the futures are down right now in overnight trading (9pm PST), I feel Friday's late day rally will continue on into Monday as well, especially since Mondays have been bullish days for the past few months anyway. But the rally should be capped at 1115 in the S&P cash index since that's where wave 'i' ends, and more heavy selling to new lows should occur soon. If 1115 is broken, then the wave structure I have above is wrong, and the market is probably just subdividing lower which would actually suggest even more aggressively bearish moves to the downside. Only a break above 1174 would severely weaken the short term bearish case. So as long as 1174 remains intact, I'll be looking at counting the market from only a bearish perspective. Any rally tomorrow that remains below 1115 might be a good opportunity for the very aggressive bears to get short and put stops just above 1115.
So the key level for the above count to remain on track is 1115, and the key level for the overall short term bearish case remains at 1174.
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.