The S&P cash index declined in a very clear 5 waves from the top last week. Today's decline was quite weak as far as breadth and declining volume, but not as bad as yesterday. The Dow has lost 300 points in two days and I now see a very clear 5 wave decline which tells me a short term bounce may be on the horizon. For this reason I sold some options against my short S&P ETF position and closed my very short term S&P emini futures position at a nice profit. The break of the ascending trendline on the daily chart I've talked about in previous posts, and now the impulsive clear 5 wave decline in the S&P cash index tells me the larger trend is down and the market should be headed to much lower levels after a possible short term bounce to correct the 5 wave decline.
My initial target for the S&P futures is the 880 level. I remain short the S&P through a bear put spread on the SPY and through a covered call strategy on the SDS. The next few weeks should have this market in a downtrend. So far, the decline is not exhibiting the type of behavior I would expect if the big wave 3 or C down is underway. Regardless, the market is headed lower in the short term.
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