Wednesday, February 18, 2009
The market internals suggest a huge move coming most likely Thursday. The market closed flat today but the Dow was up with the S&P and Nasdaq Comp. down as well as the NYSE. NYSE breadth was negative with more than 2-1 decliners to advancers. Various indices and sectors were up and down today illustrating an unstable and fractured market. Usually when this occurs, the market moves violently the next day. My wave count above suggests that-that move will be to the downside. However, in case I'm wrong, I want tight stops on up to half my position to protect myself from a violent temporary rally. I plan to start stopping out my positions on a solid break of 802 in the S&P. Most likely if the market is going to move violently to the upside then it will probably be due to some kind of news event. So I'll be watching for news releases out early in the morning and watching the markets' reaction to that news. If nothing comes out, and the the markets tank, then the next heavy downward selling phase should be underway.
Bottom line: a violent stock market move should occur tomorrow, either up or down, so I'm prepared to protect myself to the upside and profit big on the downside.
Sunday, February 15, 2009
After looking at this structure over the weekend I have come up with an alternate count which is just below the count listed in my previous post. The reason this count I'm showing now is not on equal footing is because of the heavy selloff that occurred minutes before the close on Friday which may signal what will happen first thing Tuesday morning in preparation for the stimulus bill reaction; and also because the decline on Friday is very very choppy and not impulsive. Now we've seen this same choppy widening structure just before the October selloff which I chalk up to extreme volatility as the market gets real shaky and panicky before it tanks, but it does not really fit into an EW count. So my alternate count calls this choppy decline a "b" wave within wave (2). So a strong "c" wave rally should ensue soon. A break of 841 in the S&P futures will confirm this is in fact occuring. However with momentum indicators so weak and suggesting further weakness, along with various internal technical indicators suggesting weakness, and the the projected wave count being a large wave 3, a sharp "c" wave rally will be nothing more than a golden opportunity for the bears to add or establish strong short positions. I am currently only half short, and will short much more if a rally on Tuesday occurs. On the flipside, a break of 804 in the S&P futures will cause me to add to my shorts as well because that will confirm the downtrend is in fact underway, and it should waste little time breaking the 2008 low of 741.
Bottom line: any rally above 841 I'll add to my shorts and any decline beneath 804 I'll add to my shorts.