Market Should Enter wave iii of (iii) Down on Tuesday

S&P CASH INDEX




Well the market took us on another wild ride with a sharp rally right out of the gate this morning carried into the late morning into a another surge higher, then maintained those gains all day. Not a surprise for a Monday, as most Mondays over the past several months have brought us strong rallies. Also, with the end and beginning of month jossling around it's also no surprise we've been quite volatile the past few days.

The above 15min chart of the S&P cash index shows that today fits well with the bearish wave count posted last week. Today's surge was a 3 wave move of wave ii. Today's late day rolling over is the start of wave iii of (iii). We've been in this position before. This is an easy tradable structure because we know that if a wave iii of (iii) is about to unfold then we should have heavy and aggressive selling soon; like tomorrow. If the market floats around for a while, or especially if it breaks above wave (ii) at 1209 then we know something is probably wrong with this count and the bears should be real cautious.

So right now I'm looking for heavy selling tomorrow to fit into the current wave count above as long as 1209 remains intact. A break above 1209 doesn't necessarily negate the immediate bearish outlook, but it would certainly make it much weaker.


NASDAQ 100




The above Nasdaq 100 chart shows that the bears are trying to gain control of this index. Each push higher to the 2050 level has resulted in sharp selloffs composed of 5 wave declines. So the bears are waking up here and the bulls may be running out of gas. Last week's close in the Nasdaqs set up a bearish picture anyway, as I stated in Saturday's post. So the bearish setup is in place. Although right now I feel the larger trend has turned down anyway, a close beneath 1988 would all but confirm that a substantial decline was underway.


NASDAQ 100 TRIANGLE




There is one less likely alternate count that shows a bullish picture according to the Nasdaq 100. And this may be especially important since the NDX is what clued us in to the head and shoulders structure last week. It's possible that a 4th wave triangle is unfolding right now which should give us one more decline for wave 'e', which is usually done due to some news event, then a sharp upward thrust for wave 5 to new highs on the year. One of the main reasons this triangle is unlikely is because triangles are composed of 3 wave movements, both up and down, and this proposed triangle has mostly 5 wave moves within it. Therefore it's a less likely scenario than the bearish one I mentioned earlier, but is still something to watch. A break below 1988 in the NDX would negate this alternate bullish count.


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.