Short Term Downtrend Remains Intact

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The selling pressure in the stock market today was quite intense, and fits the model of a 3rd wave at some degree.  But we need the market to play out a little more to get a high probability wave count where that 3rd wave fits in.  Volume was a solid today at 1.35 billion shares on the NYSE, down volume was 93% of total volume, and there were 6.5 decliners for every advancer.  So the bears came in and took full control of this market.  And this comes after Monday morning's big surge that was reversed by the end of the day.  This market smells of exhaustion and this is just another sign that the bears are now coming in stronger than the bulls now; something we haven't seen for a long time.  Note: just ignore the S&P data on the right side of the internals.  It's showing the Nasdaq Composite's data and won't roll over into the S&P's data for some reason.

As always, the key now is follow through.  We could get a mild rally tomorrow, but ultimately the bears want the market to continue down again by at least tomorrow afternoon or Thursday. 

So the bears need to keep the short term downtrend intact to remain in firm control of this market.  Of course the bears want the market to just continue lower from here, but rallies are going to occur regardless.  The key is that rallies don't break the series of lower highs.  So the 1207 swing high here remains important for the bears to defend here.  It's critically important for the bears who believe that Primary wave ((2)) has already topped because we don't have an impulsive decline from the highs yet.  So if you believe Primary wave ((2)) has topped already (which I don't), then it's important for swing highs to remain intact until a full impulsive wave count can be established, otherwise a new high will create a series of overlapping waves and just confirm that this decline is a correction.  Ulitmately, only a break below 1129.24 would signal that Primary wave ((2)) has probably topped already.

The action in the US dollar was encouraging for the bulls today as it continues to surprise to the upside and break down resistance.  This means that the euro and british pound are falling against the dollar.  As long as this trend continues, it should continue to put pressure on stocks and commodities.  For more details and some wave counts, please see my addendum in my prior post.

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.