Market in Wave 3 and Various Degrees, Still More Downside to Come

Above are the internals showing the insanely bearish foundation of the market move today. Volume as a whole was huge on a big down move which is basically bearish in and of itself, down volume represented 98.6% of total volume, and 18.6 stocks were down for every 1 stock up, and the S&P only had 3 stock advancing. So it was a broad based 'sell everything' decline today. This is textbook EWP wave 3 internal structure. It also means that further declines are to come. Tomorrow is options expiration day so it could be another wild day. Today's late day selling and the financial news in panic mode right now, I can see a sharp decline tomorrow morning and then perhaps a rally to end the day. But this absolutely no time to get cute on trying to catch bottoms in my opinion. If anything I would be ready to where if there is a bounce higher, it might be an opportunity to sell into it. All my key levels I've mentioned over the past week have bee destroyed so I think this market is headed lower....much lower. The evidence that wave [3] or C is underway is very high right now. I'm looking to sell into any significant rally the comes about, but most likely that means I'll be waiting for wave (1) to end and will get short on the big wave (2) once it gets underway.




Above is a cleaned up chart with proper degrees of waves I feel are likely at the present time. This also fits in with my guess that tomorrow will give us a sharp selloff early and perhaps a rally at the end of the day since this count has us in a wave 'v' of '(iii)' of 3. So wave 'v' may shoot down tomorrow and lead to a somewhat muted or flat correction for wave (iv). This is merely a guess and in no way am I taking an short positions off the table in preparation for that, and I'm definitely not getting long this market at any time. All it means is that I'm ready and prepared for the volatility coming.

The market should be heading lower and I'd only be looking for short entries.


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.

Market Should be in a Wave iii of (iii) of 3 of [3] or C

Market Internals




I was unable to access my computer and could only use my iPod to put up last night's post so I couldn't put up any charts or get too detailed. So I'm putting up an early post to make up for last night.

1149 remains key for the S&P cash index for the bears. I got a screen shot of today's market internals and you can see that in the NYSE and S&P that buyers are almost non-existent. Although it's early, if this holds up, it's definitely characteristic of a wave 3 at some degree. Barring a massive reversal today, the key levels I wanted to see taken out in the S&P have been destroyed (click here for original post).


15min S&P Cash Index Wave Count




The inernals so far show massive selling across the board which is indicative of a wave 3. The above chart shows that we could be in a wave iii of (iii) of 3 of [3] or C. So massive unrelenting selling is in order right now. The first support target is the lows made a couple weeks ago on that so called "error", which we knew was not true. The market is about to prove us right as it heads toward those lows at 1066 because it shows that the market really did want to go to that level and that it just wasn't an error.


S&P Cash Index Daily Chart




Above is just a look at the bigger picture through the daily S&P chart. You can see that there is still heavy selling to much lower levels on the horizon. 1149 remains key for the bears.


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.

1149 is Key for the Bears

I'm unable to post a full update tonight. The bottom line is that the markets downtrend remains intact and I expect much lower levels in the coming days/weeks. As long as 1149 in the S&P cash index remains intact, I am comfortable being fairly heavily short. I should be able to do a normal post tomorrow, hopefully sometime in the morning.

Todd

Downtrend May Have Resumed

Primary Wave Count




The market shot up this morning to complete wave (ii) and spent the rest of the day declining. It was a very orderly sell off that steadily pulled the market down while floating the VIX higher. There was no 'panic', it was all well thought out and orderly selling. This type of behavior can be brutal to the bulls because a slow bleed usually has a hard time squeezing shorts and therefore bottoms and buying power are harder to come by. The market simply just trickles down lower and lower. If the above wave count is correct, there should be very little alleviation in selling. The market should be headed much lower, with the first target being 1066, but it should continue on down down down. The count remains valid as long as 1174 remains intact.


Much Less Likely Alternate Count




At first, watching today's slow and choppy decline had me thinking it had to be a 'B' wave within wave (ii), and that a strong wave 'C' rally above 1149 would complete wave (ii). But two things stood out that severely weakened this view:

1) The market closed the day with NYSE down volume representing 88.7% of total volume. I would expect a wave B to have up/down volume closer to break even, not overwhelming selling. This is more indicative of a wave 3 at some degree. So again, the top count looks more likely.

2) The market maintained a series of lower highs all day, and every attempt to snap a rally higher, especially into the close, had failed. A wave 'B' is usually a 3 wave affair, or some combination thereof, but today's structure does not resemble any 3 wave combination, more like an elongated impulse.

So although this count is still possible, it's a distant 2nd compared to my top count.

Stock Market Support Shelf




It appears that the 1120 level is a support shelf, at least temporarily, for the S&P cash index, and it closed right on it. Most of the other major indices also closed right around their support shelves as well. So the fact that this level didn't lead to a sharp rally, and in fact closed right on it, is a good sign that this support will be taken out fairly soon. Looking at the daily charts, there should be little support until it reaches the levels of "the big selloff" a couple weeks ago, which is 1066 in the S&P. So a strong break below 1120 should lead to a quick move to the 1066, and according to my top count, it will go much further below 1066 as well.


USD/JPY Support Shelf




Above is the USD/JPY (US dollar vs. japanese yen) I've been tracking the past few weeks since it looks very similar to the structure of the stock market. It trades 24 hours a day so it's good to watch overnight to perhaps give a clue to what will happen during the next cash index session in stocks. The USD/JPY also looks bearish at various time frames, and it also has a support shelf. So for those that don't follow the futures can follow the USD/JPY overnight to give a clue if perhaps the stock market's cash indices will follow suit once they open. FXCM has free real time charting at click here. Looking at the S&P futures right now, the June contract is trading around 1110, which is below its support shelf. Acceleration to the downside would be a good sign that the US cash indices will tank tomorrow too. But the futures have been down big overnight quite a few times in the past several days, and have almost always been completely reversed by the time the US session gets underway. So this is nothing to get too hung up on, but something interesting to follow throughout the night, be eventually the futures WON'T reverse.


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.

Short Term Downtrend Extended, Now Correcting

The futures dropped big Sunday night but rallied back big time to start the US session in positive territory. Then the bears showed up again and pushed the market significantly lower in the morning only to see the bulls come back and push the market into a slightly higher close. It appears that a series of 1 and 2 waves have been unfolding since the top a couple weeks ago. Today's decline looks like a wave 'v', which was just a continuation and extension of the previous downtrend. I originally thought the 5 wave decline was completed Friday and wave (ii) was either done, or would be done soon. Today's 5 wave decline and sharp reversal means I need to alter the count a bit to have today being the end of the 5 wave decline composing wave (i). So now wave (ii) is underway, and it appears higher levels will be achieved tomorrow before wave (iii) of 3 of [3] or C gets underway. The market can turn down at any moment, and at this degree of trend it means it will be almost a straight line down. So I don't want to get too cute here. I simply want to be short now with stops just above 1174. If the market turns higher from here I'd merely look at that as an opportunity to get more short as long as it stays below 1174.





Above is a daily chart in the S&P that is bothering me a bit. It shows several candlesticks that have long wicks on their undersides showing the power of the bulls coming in and preventing the bears from maintaining losses into closes. Now this can be explained with EWP on the intraday charts by the series of one and two waves that unfolded from the top, but without EWP it would appear that strong support is forming around current levels. But a strong close beneath today's low of 1114.96 would be a big sign that EWP is prevailing and that these potential bullish candlesticks really don't have much potential at all.


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.

More Weakness Ahead

Not much new to add or project from what I've been posting last week. The five wave drop into Friday's low tells us that the larger trend is probably down. Seeing as that this may be a wave 3 of 3 of 3 or C means that the selling may be extremely intense. The late day rally from Friday I tentatively labeled wave C of ii. It's quite shallow so I think it's quite possible for a much deeper sharp rally Monday to finish off wave ii. However looking at the S&P futures down double digits this evening makes me want to possibly count wave ii complete already, and that wave iii of (iii) of [3] or C might possibly get underway Monday.

1174 in the S&P cash index remains key for the short term bears.


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.