Friday, October 1, 2010
Bears Keep Putting the Smack Down, but Waiting for Follow-Through
The 5min Dow chart above shows that both yesterday and today the bulls came out of the gates strong, gearing up to gather momentum and surge this market to the moon with a vacuum affect first thing in the morning. It failed miserably both times suggesting a process of reversing the bullish trend may be underway.
Yesterday the rally was reversed sharply in an impulsive manner to a new low. Then today the bulls rallied again right at the open, but not nearly as strong or high, and yet again the bears put the smack down and brought the market to a new low. So the bulls are showing some exhaustion and the bears are starting to wakeup. But now the bears need to gain control and not just play defense.
Right now the move after the impulse decline yesterday morning is sideways and choppy, fulfilling its expectation of being a correction, which I am calling Submicro wave (2) which is shown in yesterday's post. But the action from the high this morning is not impulsive so it suggests a new high on the day above the Dow's 10,866 will occur either today or Monday before Submicro wave (3) gets underway. But the rally should stay below yesterday's high at 10,949. Now this is what the market action would be if it moved in perfect Elliott Wave form. But we know that's not always the case. So even though the perfect scenario would mean a new high on the day while remaining below yesterday's high for Submicro wave (2) to top, we know that it can actually tank hard to the downside at any time. So beware.
Aside from the lack of an impulsive decline today, we should also note that the euro rallied big today and is showing no signs of weakness, the VIX is falling, and Goldman Sachs and financials are showing relative strength to the rest of the market which all suggests the market isn't quite ready to get Submicro wave (3) underway quite yet.
But as long as yesterday's highs remain intact, I'm firmly 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.