Monday, August 23, 2010
EWP Continues to See the Future
The market was an utter snoozefest with the exception of the first and last 30 minutes today. The market surged higher with strong internals and with much "glee" in the financial media with all the M&A (mergers and acquisitions) activity in the market. But the glee didn't last long and reality set in that this M&A activity does nothing to uplift the economy, and in fact probably will just lead to more consolidation and streamlining, which means more downsizing (my opinion).
Volume was extremely light today as it didn't even get above 900 million shares on the NYSE, so we should keep that in mind as we read the markets here.
What's of great significance though is how well the market is following EWP's impulsive rules and guidelines which allows us to gain a strong edge in the market in my view. Last night I stated that 1100.14 was the key level for the very short term bears to hold, and they had no problem doing so prior to this morning's reversal at 1081.58. The bears remain in comfortable control and lower levels should be acheived in the coming days, and possibly weeks or months by the way this market is unfolding right now.
Notice that the above wave count has us setting up nicely for a wave iii of (iii) of 3 of  or C. Which means total market destruction in the coming days. Anything short of that means that other possibilities are on the table. It doesn't mean they're all bullish, no way. It just means that wave ii, or wave (ii), is just becoming more complex than I thought. As long as 1100.14 remains intact, I have high confidence in remaining aggressively bearish here. And only a break of 1129.24 would break my bearish spirit.
Above is an hourly chart illustrating the recent reversal candlesticks we've seen at this timeframe recently. I circled the ones I wanted you to pay attention to. You can see that when we get those long wicks, especially when a strong candlestick follows, we get a strong move in the direction of the reversal for several more candles. So you can see how significant today's bearish reversal early this morning may be. This supplements the wave count well too since it suggests the market should fall hard in the coming days. For extremely aggressive bears, I'd use today's high of 1081.58 to really hammer this market short here. Also note that the daily candles show that the market rallied to a strong new high above Friday's high, and then closed significantly below Friday's open. These candlestick patterns suggests that at least in the short term we'll see further selling to new lows this week. But with the EWP wave count shaping up the way it is, and with 1100.14 well intact, the market can easily fall much much further.
Stocks and the euro are moving more or less together lately, and both are unfolding in nice EWP wave patterns. With the euro and stocks lining up well for 3rd waves at various degrees, I wouldn't want to get too cute with entry points. The profit potential for the bears if my above euro count is correct would be enormous. This also lends itself well to the bearish stock count as well.
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.