Short Term Bearish Setup; Jan. 22, 2009

Here's a 5min S&P futures chart showing an ascending blue trendline that held the rally above it all day today. Late in the day the rally then ran out of steam and started to fall, causing the S&P to break through the trendline and trade below it. As typical in breaks of trendlines, the index then rallied to try and break through above it again, but after several attempts (see red circles at top), the bears took over and sold the market off lower. This short term minor technical indicator may be a sign that this short term rally has ended and more heavy selling will occur, taking the index below 800. But again, this is just short term speculation so I can try and grasp where the market is going in the near term. My stance is solid that the market is in a corrective phase, and when it's over it will send the market well below 740 in the S&P cash.

As for the short term setup above, we'll see Monday how it plays out.

Another Wild Day; Jan. 23, 2009

Another wild and unclear day for the short term picture. Right out of the gate this morning the market fell sharply and everything looked to be going as planned. But then it spent the rest of the day rallying. Again, making things a bit unclear in the short term. With all this choppiness and lack of clarity, it tells me we are in the middle of some type of correction. The bottom line is that the larger trend is still down until 740 in the S&P is broken. So I will use rallies as an opportunity to add to my short positions. Ultimately, 943 in the S&P should not be even close to being tested before 740 is breached.

Bottom line: with short term structure unclear, but larger trend remaining down, I'm shorting rallies until 740 is broken.

Wave Structure Unclear, but Trend is Down; Jan. 22, 2009

The stock market has not be following my projected paths laid out in the previous posts telling me that something else is unfolding. Momentum indicators, breadth, and the wave count are all giving unclear and/or conflicting signals. This tells me it's likely we're still in some type of correction, whether it's in a B wave down, or some type of triangle at some degree is unclear. The one thing I'm fairly certain of is that the larger trend is still down, and 740 in the S&P will be broken. So my strategy is to remain about 50% short, and add short positions to rallies or when wave structure clears up in preparation for a break of 740.

Once 740 is broken, a significant bottom, or THE bottom could be in at any time. So I'll be working on exiting short positions and getting aggressively long for a multi-month or multi-year rally.

Rally to 870-900 Then Massive Selling to Below 740 Quickly; Jan. 21, 2009

Yesterday's 300+ down day was very unexpected and threw a wrench in an otherwise perfect setup. The rally I called for on Sunday's post was delayed by a day. We are now in the rally phase that should take us to the 870-900 level over the next few days or couple weeks. From there, we will give way to a large wave 3 down that will run right through the 740 low of 2008 and probably well down into the 600s. This rally phase we're currently in is giving me an opportunity to add to my short positions as it rises.

I do not want to miss the next selling phase. It should be feroucious, and should be somewhat similar to the October selloff, only not as large.

The Market Gods Have Given us a Gift; Jan. 18, 2009

Once in a while the markets trace out a structure early which tells us with high probability what's unfolding in the bigger picture. This is that time. Above is a 15min S&P cash chart showing a clearly corrective rally that started on Friday. You can see an indisputable 3 wave rally off the 817 low. Then the market declined beneath the previous low in the 833 area. This makes it impossible for a series of 1's and 2's to be unfolding and some type of impulsive 5 wave rally to occur. It is clearly corrective. Getting this data so early in a market move is so valuable. This instills great confidence that the market will make at least a new low beneath 817. So in my opinion, I now want the market to rally strong and high, because it will allow me to short bigger and at better positions as it does so, therefore making me more money. As long as the market trades above the 817 low, it's a correction and I'll be shorting it.

I see this coming rally and ensuing 3rd wave decline as a great opportunity for us ellioticians to make some big profits in the coming weeks. This should be the best setup for us since we made a killing predicting the crash in early October. The setup is coming....