The S&P and Nasdaqs charged to new lows today making nice 5 wave declines In the S&P, the 4th and 5th waves are tough to label, but the ugly triangle I have above is a good start for now. Today the NYSE had more decliners than advancers and just a bit more volume to the upside than downside with the Nasdaqs and Russell 2000 small cap indices struggling despite the Dow's strength. So it was quite a lopsided unhealthy rally from the lows and not an across the board bullish run higher; something we'd see in a correction, not the start of a fresh new bullish surge. Looking at the above S&P chart, it's possible that wave [ii] ended this afternoon since it rallied to a common retracement level just above the previous wave 4. But it's quite sharp and looks like a 5 wave move, suggesting that it needs to subdivide further and higher before it tops in wave [ii] and reverses. Also, the action in the Dow also suggests further upside.
Dow's Bullish Non-Confirmation
An element of caution is warranted for the over-aggressive bears since the Dow has been resilient to the decline so far, and especially was quite strong today. It did not make a new low for a 5th wave like the Nasdaqs, S&P and Russell did. This leaves a 3 wave decline for the Dow. Now the weak internals today make me think the Dow is not leading the market higher at all and that people are just fleeing to higher risk assets and putting them into the solid blue chip companies in the Dow for protection; hence the reason the high risk Nasdaq Composite and Russell closed down today despite the Dow's strong showing. So it's possible that the Dow may eek out another high while all the other major indices do not, and then the market reverses lower for the S&P's wave [iii]. Right now, that's my best guess at this point. My current short positions will stop out if the S&P makes a new high on the year, but if it does, I'll have my finger on the trigger to re-short real quick on the next signs of a top because just a two day mild drop is not enough to alleviate this massively overbought condition we're in right now. So I'm short term bearish as long as the S&P's highs on the year remain intact, and know that my gut will be tested in the short term as the Dow's telling us the market will rally further in the very short term.
PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.
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