Gold Dropping in 5 Waves; Jan. 6, 2009

Above is a 30min gold futures chart from this morning showing what looks like two 5 wave declines. Also, the EUR/USD has dropped below a strong support level indicating that gold and silver's next declining phase is underway. My gold target is in the low $600 area.

Market Falls, But There's Still Underlying Strength; Jan. 5, 2009

The market is down today with the Dow leading the way with the biggest losses. However NYSE breadth is actually positive with more up volume than down volume and the advancers outpace the decliners. This is bullish. Plus, several sectors are actually up today with energy being the biggest gainer. So as it stands now, this does not look like any significant declining phase beginning, but rather just a pause in the uptrend towards the 950-1000 area.

The Rally Looks Very Corrective; Jan. 3, 2009

The rally from early last month looks very corrective and is waning in underlying strength already. Although it appears the market will continue to rally in the coming days into the 950-1000 S&P range, it can fall at any time, and it should fall hard when it does. With that in mind, I'd rather just short rallies instead of trying to get long this market and against the larger trend, which I see as down still.

The Rally Continues; Jan. 2, 2009

The rally continues to push higher, but on very light volume through the past few trading days. The key is what will happen when the big players re-enter the market sometime next week. 919 is a key level in the S&P and a strong break and close above that level should see the index headed charging for 950-1000. Unless the rally halts and sells off soon to relieve the dragging bearish divergence on all three momentum indicators (see chart above), then the more likely the reversal will be final and lead to new lows beneath 740.

Expecting Big Move at the End of Today; Dec. 31, 2009

I expect the market to sell off big at the close today. Currently the S&P is at 905

S&P Cash 15min Chart Shows Major Bearish Divergence; Dec. 31, 2008

Another quick note, above is the 15min S&P cash chart which shows all three momentum indicators at the bottom of the chart are not confirming the huge rally in the index. And the MACD is actually crossing lower and in the red even though the market continues higher. This doesn't tell us when the market will drop lower, but it tells us that this rally will be reversed at a large degree.

Caution Warranted as we Turn to a New Year; Dec. 31, 2008

Just a quick note: the market has continued this rally on somewhat strong breadth. I am very wary of chasing this rally at all because it's the end of the year and there's light volume today. I see this as a good opportunity to add to my shorts, which I did. I wouldn't be suprised if the market flips wildly in the last 30 minutes of trading today as players jossle for position into the new year. Wackiness is occurring today so caution is warranted reading too much into today's action. For example, the EUR/USD dropped 200 pips over night yet gold is actually up $5 today! Amazing. It's quite possible we will rally all day and then sell off hard into the close and then the selling won't stop for the next few weeks. Or, we rally today and a few of the first days in the January and then sell off hard.

I'm shorting rallies.

S&P Daily Futures Chart With Potential Bullish Targets; Dec. 30, 2008

Today's rally was strong other than it was on light volume as expected due to the holidays. With the rally unfolding today, we can see from the above daily S&P futures chart that there is a possibility the bullish move to the 950 area is underway. I listed 3 key resistance levels that should ultimately halt the rally, if it even gets there. Those are the levels I will most likely add to my short positions.

Rally Invalidates 5 Wave Decline; Dec. 30, 2008

In overnight trading, the Dow and S&P futures broke the beginning of the proposed 5 wave decline I labeled yesterday (see above chart) invalidating the wave count and conclusion that the trend was now down. With another failed test of prior support area in the 850s again yesterday, it's possible the rally to 950+ is underway. However it needs to get moving quickly because indicators and time are really not supportive of this move at this juncture.

I have not changed my strategy of holding fully short, and am prepared to add to my short positions on any significant rallying.

Large Swings at the Close, but Larger Picture is Bearish; Dec. 29, 2008

Above is an hourly cash S&P chart and it shows a strong support line (red horizontal line) in the 857 level. The market is telling us this level is important because it's bounced off it several times. Once the S&P makes a strong break of this level and closes the day beneath it, it should lead to an acceleration of the downtrend and target the 750 area. Despite today's strong bounce back at the close, we had a five wave decline, a choppy rise, and decliners outpaced advancers by almost 2-1 and down volume was 66% of volume was to the downside.

Regardless of whether or not the short term gives us a strong rally to the 950+ area, this entire rally from 740 looks very likely to be a correction. So I will be shorting any significant rallies.

Declining in 5 Waves Now = Downtrend Has Resumed; Dec. 29, 2008

The market has now declined twice in 5 waves in all the major indices. The evidence continues to point towards immediate market weakness instead of any strong rally occurring first. Above is the S&P 15min futures chart that shows a 5 wave decline, then a fibonacci 78% retracement, then another 5 wave decline. This tells us the trend is now down.

The next level the S&P futures needs to break to strengthen the bearish view is 852, and in the cash S&P it's 857 and 851. A break of those levels in both the futures and cash markets will confirm that a strong declining phase is back underway that should take the S&P to AT LEAST the 750 area.

Important Candlestick Forming Today; Dec. 29, 2008

The formation in the market tells us it's at a big crossroads and today could give us a big clue as to its direction in the coming days/weeks. If a large bullish or bearish candlestick forms today (see chart above) then it should continue in that direction in the coming days/weeks. So far the market is weak internally and nominally, but that can change in seconds with light trading volume today.

Market Flat Until After Holidays; Dec. 26, 2008

The market has been fairly flat and volume has been absurdly low. I see that with the new year coming around the corner big moves should occur in the market soon. I'm positioned to benefit from that move being to the downside, with tight stops on most of the positions. Nothing has really changed in my analysis over the past week or so. The market should rally into the 950 S&P area, but its failure to do so in a timely manner and weakening momentum indicators tell me that may not happen. So I'm positioned short this market with the idea that's it's quite possible for a strong rally to 950. So I have plenty of capital on the sidelines to short such a rally.

I'll post something new when I see something worth mentioning.

Market Uncertainty Calls for Positions with the Larger Trend....DOWN; Dec. 23, 2008

The market's failure to rally into my target area of 950 for quite some time and numerous bearish indicators that show a big decline can occur any time has caused me to abandon my long positions. With very light volume during the holiday weeks here it only adds to the uncertainty and risk. The larger trend is down, that I'm quite certain of so I have modest short positions and will add to them if the market rallies.

As for the short term movement day to day, I have no idea. I'm short and holding short for the next declining phase.

I have no long positions anymore; Dec. 22, 2008

No time to go in great detail as I'm reconfiguring my strategy. The market has failed to rally as proposed for quite some time now. Today is a light volume day but the market suggests a rally but it keeps drifting lower. I don't like what the market is doing so I exited my long positions and am only modestly short various sector ETFs and the Nasdaq 100. I am still allowing for a sharp rally into the 950 area so my short positions are fairly small in preparation to reshort on rallies. A strong S&P break of 850 should eliminate most/all bullish possibilities in the short term.

To sum up, I'm now only short with modest positions on in preparation for a strong rally where I'll just add to my shorts. A strong break of 850 in the S&P should result in an accelerated decline and will cause me to pile on more short positions.