Larger Trend Remains Down

S&P 500 CASH INDEX COUNT




Friday I expressed caution for the aggressive bears, citing several pieces of evidence showing that the market was oversold, and that downside momentum was waning. This morning we got a big pop leading to a strong triple digit Dow rise with strong internals. However the rally didn't last long as less than an hour into the session the bears came out and pushed the market lower for most of the rest of the day, even at a couple points turning the market negative. So the market did indeed rally as the evidence Friday suggested, but it did so very quickly. This short rally and reversal action time and time again illustrates the struggles the bulls have been having in mounting and sustaining rallies. It also probably speaks to how strong this downtrend probably is.

Building on today's thesis of the larger trend being down, we can see in the above count that today's rally was quite possibly a 4th wave, and that perhaps the 5th wave is now underway since we can see a nice 5 wave decline from today's 1043 high. According to this count, the market will make a new low beneath 1011 before making a new high above 1043.


UNDERSIDE TEST OF KEY 1040 LEVEL, WHICH IS NOW RESISTANCE




Speaking of 1043.....that high today also represents an underside test of the key 1040 level that was important for the bears to take out in order to further confirm that a larger downtrend was underway. Once major key support levels are broken, they will then quickly be re-tested on the underside of that level, which has now become resistance. Today we got that test on the underside of the key 1040 level, and the market reversed sharply in 5 waves after doing so. This is a very bearish sign.


MARKET INTERNALS




Depsite most of the major indices closing positive today, and the Dow mounting a big triple digit rally this morning on strong internals, by the end of the day the internals of the market were mixed-to-flat. The NYSE had more declining stocks than advancing stocks, but had more up volume than down volume. This "mixed" picture is especially odd since the NYSE managed almost a 1% gain today overall. So even the internals of the rallies the bulls do manage to sustain into a close are still done on very anemic internal strength. The bulls' legs are clearly shakey.


INDEX TRACKER




Above is a list of how some indices closed on the day today. You can see that although the majority of indices closed positive today, but the high risk small cap indices were down big today, and the Nasdaq Composite barely eeked out a gain in the final minutes of trading. When taking in all the evidence previously mentioned here, the fact that the high risk indices lagged this rally badly today is more evidence that the bears are still firmly in control and that the larger trend remains down.


AMATEUR NIGHT




I've often heard that the first and last 30 - 60 minutes of trading is done by mostly amateur traders, and the meat of the trading day is done by the professionals. If true, the above 3min chart of today's action tells us a lot. I drew red lines at the halfway point between 30 - 60 minutes at both 45 minutes into trading this morning, and 45 minutes at the end of trading this afternoon. Notice that during those "amateur times" the market rallied hard while during the meat of the day when supposedly the professionals dominate the market, the trend was clearly down. Now most of us know that money is made by following the professionals, not the amateurs, and this chart is telling us that the professionals are selling this market. Also notice that the segment belonging to the professionals traced out a clear 5 wave drop. So the professionals all by themselves are telling us that the market's trend is down. I'm following the pros. 1043 remains the key level for the bears to defend for the immediate bearish case.


EUR/USD




Lastly I wanted to post a EUR/USD chart and count. It appears that the euro is wrapping up a large rally that I believe might be a large 4th wave. This is evident by the apparent 3 wave a-b-c rally that is finishing off wave 'v' of 'c' right now. If correct, the profit potential is enormous since this currency pair should drop over 700 pips before even trying to form a bottom.



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.