A Major Top is in; Wave [3] or C is Underway

The bottom line is that all the major indices have make stong breaks and closes beneath their previous support/resistance channels that held them in check for many months. The S&P closed well below 1080 on Friday with the bearish internals to convince me that the move was deliberate, and meaningful. Also of note, some of the declines in the major indices and sectors can be counted as 5 wave affairs. The combination of these two factors alone strongly suggest that a major top is in and that the big daddy bear market has resumed. Ultimately, the S&P should get to beneath 666, and much faster than the 10 months it took to rally off of that level.

If this count is correct, the power and force of this new downtrend will be so fierce that playing or planning for rallies will be a fool's errand. I may point out from time to time probabilities of rallies occuring, but rarely will I change my market positions, and I will never get long, except maybe to hedge slightly, at any degree. Simply put, the larger trend now is strongly down and my main strategy will only be to add to my short positions on big rallies, if they occur.


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.

I Moved GBP/USD Stop Down to 1.6185

The GBP/USD has broken out from consolidation to the downside, so I expect a sharp downward move now and a possible immediate retracement so I want to protect my position and lower my stop. I moved it to the last 1hr swing high at 1.6185. My entry was 1.6235 for this will lock in a 50 pip profit at the moment.


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.

Thunderdome Back on Today

Shortly after my morning post the S&P accelerated lower to break beneath 1080 a couple times to which it rallied significantly later in the trading day. Again, Mr. Market is whispering in our ears that the 1080 level is very important. If you just look at the long term S&P daily chart you'll see the heavy support there the past few months. But more importantly you'll see that once that support gives out, there's nothing left to hold it up until the 1030 area. You can see in the above chart that the S&P rallied sharply after slightly breaking through 1080 a couple times, but the rally turned out to be a series of overlapping waves that were ferociously reversed late in the day. This suggests the rally was a correction. If so, the market should charge lower soon and break through 1080. A strong close beneath that level should confirm that wave [2] or B is complete, and that a large and power wave [3] or C is underway. The only thing that is not so encouraging for the bears is that today's internals were not as weak as I'd expect after seeing today's action, volatility (VIX) spiked only 2.6%, and volume was quite low; the characteristics of which are usually that of a B or 5th wave. Regardless of the short term ups and downs, I'm keeping my eye constantly on the bigger picture which I feel is firmly downward. I'm not playing every up and down move in the market, but I do plan to add to my short positions if a large rally ever occurs. We'll see. Watch 1080 in the S&P.



One other thing about the S&P I wanted to point out was that even though the index did not close beneath the all important 1080 level, it did make its lowest close during that consolidative period pack in late 2009. This action, combined with the actual slight break beneath 1080 intraday, creates a large wedge in the floor support at this level. This bullish support floor is wearing down, and it's just a matter of time before it caves in and the decline accelerates again.



The XLF financial sector ETF did what I thought it might do and bounce off the $14 level after closing almost right on it a couple days ago. Just as the 1080 level is important to the S&P, the $14 level is important for the XLF. I assume the outperformance to the upside in the XLF today was mainly because people know that bankers will benefit from having Bernanke continue to give them billions of our hard earned dollars at almost no interest. But that euphoria will fade soon as all signs point to this sector plummeting lower. Watch the $14 level; when that breaks down, so will the sector.

As for the GPB/USD, it did a huge reversal this morning but had little follow through, keeping it in a consolidative phase. I'm hesitant to move my stop down any lower because the pair may continue this up/down sideways action for a while, and I don't want to miss a break lower as it should be fast, fierce, and big. So my stop will remain 1.6295 for the foreseeable future.


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.

S&P Just Declined in 5 Waves on 5min Chart

Well yesterday I was wrong in stating we'd have a rally continuation in the coming days. That still may happen as this current sell off isn't that convincing internally as the VIX barely spiked 4% so far, volume isn't stellar, and the NYSE internals are bearish but not jaw-droppingly bearish. However, the decline this morning has traced out a clear 5 wave drop, so any crazy bold bulls in this market might want to observe the market here. Just above 1100 is key to the short term bearish case at this point. A strong close below the long held support of 1080 would be deadly to the S&P.

I was also wrong on the GBP/USD tracing out a triangle that was going to thrust lower. The pair actually thrusted higher, but did not hit my long held stop of 1.6295 and ended up reversing sharply this morning. This pair is still severely lagging the decline that the EUR/USD is undergoing so I would like to lower my stop in the near future.

I almost feel I shouldn't have posted anything yesterday, lol!

Stock Market is in a Wave 2 Rally; GBP/USD Points to a Sharp Thrust Lower

The market bounced all over the place today, and tanked hard in the morning but recovered into and after the Fed announcement to close positive. This can easily complete a 5 wave decline in many of the major indices to include the attached S&P count. The XLF financial sector ETF did in fact bounce hard off the $14 support I mentioned yesterday, again suggesting the downtrend needs to take a breather.




The above S&P hourly chart shows a potential stopping point for this wave 2 rally. The 1115 level has been significant in both resistance and support over the past few months. I suspect this will provide another barrier for this current rally, and perhaps may cap the rally altogether. What's also of interest is that the 1115 level is very close to the 50% fibo retracement of the entire decline from the high. So this level should act as a good barrier for the market's rally in the coming days. I highly doubt this year's highs will be broken, but this is a wave 2 rally so it should be strong and feel "euphoric" in that the worst is over and this recent decline was just a hiccup that is now over and the return to the bull run is on. I doubt this will be the case at all. The market should halt shy of this year's highs and reverse very sharply in a very strong and fast wave 3 down. I'll do the best I can to identify the turn when I see it.




As for the GBP/USD, it appears to be forming a triangle that is complete, or near complete. I have the entire decline from the recent highs as an A-B-C affair, with the B wave as the triangle. This isn't preferred in the bigger picture because I feel the GBP/USD has formed a major top and is in a downtrend, but the structure this pair is tracing out is quite clearly a triangle. Triangles can only occur in X, B and 4th waves according to EWP. So this is why I think it's a B wave at the moment. Regardless, this consoldition should eventually lead to a sharp continuation of the most recent trend, which is down. That means that at least a break of 1.6076 is on the horizon, but should carry much further. I'm saying this because once I see the thrust underway I will probably trail my stop until stopped out because thrusts are sharp affairs that are immediately reversed. So I have my finger on the trigger ready for thrust to close my short position. My stop is still currently at 1.6295. It's possible that instead of a triangle, it's a series of 1s and 2s, but I'll make the market prove that to me by not hitting my stop as I trail it down.


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.

VIX Buy Signal Executes; Stock Market Count Reworked

Another day in Financial Thunderdome with the markets raging to a Dow up over 80 points only to see it reverse sharply into a negative close. There's numerous ways to count this market as you may have already seen some of the options I've laid out here in the past few trading days. But I have to chose one and hold it as my primary count. I'm posting the above S&P cash index count as my top count, despite the fact that the 3rd wave is not perfect looking and appears to actually be a subdivision of smaller waves. This may turn out to be true, but for now I'm leaning toward this count I have above. One of the reasons is that the VIX buy signal executed today:



As you can see on the above chart, the VIX's daily close landed beneath the upper bollinger band after closing above it for a couple trading days. This issues a buy signal for the stock market. That doesn't mean it has to turn higher immediately Wednesday, but it probably means we'll be in for a meaningful rally in the very near future. So with that in the background, it has me looking at wave counts that might support a large rally for a few days. The S&P might fall to a new low tomorrow completing its 5 wave drop from its high this year, and then rallying in a wave 2 for a few days. Also, look at my Russell 2000 chart:



The Russell 2000's subdivision are unfolding a bit differently that the S&P. As you can see it appears to be completing a wave v of (iii), which is a little behind the S&P. So this index can rally for a while as well in the near future, as what's indicated by the VIX buy signal. Lastly, let's look at the XLF:



As you can see, the XLF has lagged the major indices for the past several months and failed to make a new one with them this year. It's now breaking down significantly, and today was no exception as it was down 1.75% with the S&P down only 0.43% and the Dow closing almost flat. The $14 level appears to be an important level for the bulls as it has acted as support for them since September of 2009. Today it closed right on that support at $14.01. A solid break and daily close beneath $14 should result in accelerated declines to at least the $12-$13 area in quick fashion. However, oftentimes such tough and long lasting support levels take a while to break down and result in a test and rally before falling again to break through it. So it's possible that today's close on that support will result in a big bounce tomorrow off this meaningful support line. This too would coincide with the S&P, Rusell 2000 and VIX data I mentioned earlier.

Tomorrow is the Fed announcement so the market may have a wild day tomorrow, especially after the announcement later in the day. Since financials are so tied into what the Fed does, it's possible that this may be a definitive moment for the XLF. So watch the $14 level in the coming days/weeks.

To sum up, the larger trend is clearly down as the major indices are having trouble mounting a sustained rally. Counting the very short term waves can be tricky, but I'll do the best I can. The evidence right now suggests that a short term bottom might be building but that is no certainty. If we are in fact in a wave 3 or C as I suspect we are, then the selling forces will be so strong that rallies can be very hard to come by, and when they do come they can be very short in both price and time.

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.

S&P Futures Completed 5 Waves Down; VIX About to Issue Buy Signal

Looking at the S&P futures it appears that 5 waves down may have been completed in last night's session. This has come to the forefront after today's market action failed to continue to the downside, the market is now accelerating higher, the AUD/USD structure looks poised for a big rally, and the daily VIX is about close beneath the upper bollinger band and issue a buy signal at today's close. This can all change in a heartbeat as the market is still trading, but I wanted everyone to know that this is what I'm watching today, and that the evidence for the short term is moving toward a bottom being in the stock market, and a corrective rally being underway. The highs of the year should not be broken, but it appears a multi-day/week rally phase could be underway in the 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.

I Closed my AUD/USD Short Now at 0.8945

Although I'll probably regret this as it seems like the dollar is about to soar and the stock market is about to tank, but I can't get the clear 5 wave structure out of my head that the AUD/USD has formed by making new lows last night, including the apparent 4th wave triangle which leads to the thrust we just had to new lows, but also leads to an immediate reversal. So to protect profits on my trades, I closed my AUD/USD position. I originally entered this short trade at 0.9060 and closed it at 0.8945 for a 115 pip profit. My GBP/USD remains open as it just completed a 5 wave decline from yesterday's highs and is about to make a new low which might be the start of a wave 3 so I'm hanging on.



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.

Stock Market Should Work Lower; AUD/USD Stop Lowered

The stock market attempted a rally today, as it has many times before on Mondays. And it succeeded most of the day. But the bears came out roaring into the close and pushed this market down by the time the bell rang at the end of the day. I count today's action a small wave iv. which in the S&P it's a bit wide compared to its wave ii. I show attached. However, the Dow did not make a new high late in the afternoon like the S&P did so it's sporting a much better proprotioned wave iv. to its wave ii. With that said, it's important for the market to surge lower in full force in the short term if my count is correct because we're now embarking on a wave iii. of iii of (iii). It should be virtually a straight line down affair. If the market doesn't plummet lower tomorrow or early Wednesday, then this count needs to be reworked.




The AUD/USD has worked to a new low, making it a possible 5 waves down completed soon as you can see from the attached 1hr chart. I'm lowering my stop to .9090 from .9285 at this point. A break of that level will mean the series of lower highs has been broken, and may mean that a larger rally is underway that I want to get out of the way of. I'd like to see the AUD/USD's decline accelerate in perhaps an extended 5th wave, or even a wave 3 if my count attached is incorrect. Normally I would exit this trade with the new low, but with the stock market possibly on the verge of sharp move lower tomorrow or Wednesday, I want to hand on to my long dollar positions as the dollar should benefit from a stock market sell off. My GBP/USD stop is still at 1.6295.

More tomorrow.


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.