I'm on High Alert for Wave 3 to Start any Time Now; August 28, 2009

With the straight line up in this rally, the government including Bernanke taking credit for the recovery, optimistic levels at extremes higher than the 2007 top, breadth contracting significantly in the past couple weeks, light volume at the second half of the rally, the wave count can count complete, and the S&P and Dow are at their previous 4th wave levels, it's time to get serious about looking for wave 3 down to begin.

It should start very soon and I'm on high alert for it. I just went fully short this morning with long dated 2011 put options on the IWM, SPY, QQQQ, SLV and XLF.

BE READY! This decline will be for the record/history books and should take at least 60% off the major indices bringing the S&P to at least the 400s area by the end of 2010!

Wave 2 Appears to be Struggling, Watch out for Wave 3 Soon; August 26, 2009

Wave 2 is really starting to struggle and according to the wave count is almost over. The advance/decline ratio on the NYSE has been weakening significantly the past couple months showing a higher demand to sell and less of demand to buy different stocks, up volume vs. down volume has been narrowing as well, volume overall has been fairly light late in the rally, the RSI and other momentum indicators are sporting a bearish divergence (see above chart), and most importantly optimism has reached extreme levels exceeding that of the 2007 top! The sideways action the past couple days looks like a small wave 4, perhaps a triangle, which means a shot higher to a new high should occur and then a reversal. I expect my 1067 S&P futures level to be tested as I've said it will for months now when this rally got started. Perhaps that may actually mark the top of wave 2.

The bottom line is that wave 2 appears to be in its final stages and with bullish demand waning and optimism at an extreme that's higher than at the 2007 top, the market is poised to undergo the monstrous wave 3 down to the 400s at any time. Time is very speculative in EWP, but my guess is that wave 3 will start before the end of September of this year.

Be ready!

Long Term Wave Count Projection Falling Into Place, Wave 2 Ending; August 26, 2009

Just thought I'd post the long term daily S&P futures projection I've had up for months now with the current price printed. So far it's followed the projection pretty well. All along I thought the 1067 level (prior 4th wave extreme) would attract the S&P futures and so far it's moving close to the area. Optimism is at an extreme and breadth and volume continues to contract telling me that wave 2 is likely coming to an end.