Market Fractured, Reverses Impulsively

Yesterday I said 1168 in the S&P was key to the bearish case, and even if it was broken I'd still be looking for a top and reversal after 1170 was broken. Well I didn't account for any inter-market divergence to occur where one index may make a new high while the S&P did not. As you can see from charts above, the Dow and Nasdaq 100 both surged to new highs, however the S&P and Nasdaq Composite did not. All the indices have recently declined in a nice sharp 5 wave pattern. The fact that not all indices made new highs and that the current decline is an impulse move, it suggests the larger trend must be down. The only thing that gives me concern is the very corrective looking decline in the S&P and Composite. They look more like ABC corrections with a wave C occuring this morning for that 5 wave decline. Nothing's perfect and we have to play the probabilities. But I wanted to post an update here because as it stood yesterday, 1168 was key to the bearish case, but seeing that the S&P and Composite couldn't follow the other indices to new highs may mean a top is in. The size and magnitude of that top will be revealed later today or early next week as this market action unfolds. I'd be carefully looking to short this market on any bounce as long as risk was very tolerable on the trade. The action throughout the day and next week will really shine some light on the larger trend.


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 Picture Clearing Up; EUR/USD Looks Bearish

Bearish S&P Cash Count




The market flipped flopped around like a dead fish, AGAIN. But is looking very fractured and out of gas. I've know I've been saying that for several days now, but I have to call it as I see it still. The above count on the 5min chart shows a possible impulsive decline developing. I'm a bit hesitant in getting too excited about this count because the second set of 5 waves down in red look more like a 3 wave drop to me and I had to label wave v a truncation, and today's late day rally has come close to the "rubicon" for the bearish count at 1168. A break above that level will negate this count and put the bullish alternate count as my top count. So risk is clearly defined for the bears, and it's very tight at less than 3 points away.

Another thing to note is the Dow/NYSE indicator I've mentioned a few times many moons ago. In the last downtrend we had from 2007-2009 I noticed that when the Dow Industrials closed positive and the NYSE closed negative, the next day resulted in a big sell off. Well today we had a real divergence in prices between the two with the Dow closing up about 0.4% and the NYSE closing DOWN about 0.4%, and NYSE decliners outnumbered advancers, and down volume was quite a bit larger than up volume. So today was quite a negative day despite the Dow's strong showing. With my bearish count above still intact, we may have started another downtrend, and that means the Dow/NYSE indicator may be back on track for reliability again. We'll see if this divergence between the Dow and NYSE results in a sell off Friday.

With the EUR/USD appearing to have resumed its downtrend, options expiration tomorrow, and the Dow/NYSE divergence in place at the close today, we could be in for some real weakness tomorrow if 1168 can hold.


Bullish S&P Cash Count





On the flip side, there is a bullish alternate count that will become my primary count if 1168 is broken. By breaking above 1168 it will make the drop from 1170 a 3 wave affair and mean that new highs were on the way. I'm not sure I'd want to get long at this point, unless I was looking for a day trade or scalp, but it's a good level for the bears to watch. With 1168 less than 3 points away it brings about a great risk/reward for the bears to get short in hopes of a bigger decline developing. And even if the market surges higher, I'd still be on the lookout for a sharp reversal and opportunity to reshort on that weakness once it makes a new high on the year above 1170.


EUR/USD




As I mentioned earlier this morning, the EUR/USD really broke down today and made a nice 5 wave decline from the highs. The pair struggled to hold gains above 1.3800 twice recently and has now reversed sharply in 5 waves. This failure at 1.3800 has created a double top and the reversal being composed of 5 waves makes this pair highly desirable from the short side on any sizeable rally in my opinion.


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.

EUR/USD Declining Impulsively

Just a quick note; the EUR/USD is declining in 5 wave suggesting the trend has turned down again. It's probably a little late to get short now, but I'll be watching the pair for rallies to try and get an opportunity to sell.


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.

Wave Count is Looking Complete, What's Next?

S&P Cash Index Wave Count




The S&P pushed higher today pushing the Dow to a new yearly high, confirming the rise in the other major indices. This erases any possible intermarket non-confirmation that would have supported the bears if the market were to have turned down while it was in place. The market looks strong when looking at price only, and there's no real signs of that rally derailing at the moment. However the wave count shows that this market might be completing a 5 wave advance from the 1045 area. I'm not in love with this count at all, especially the way wave 1 and 2 are shown and that wave 1 is incredibly small compared to wave 5 which is an extended 5th, but it's the best possible view in my opinion. The market is very overbought on several different levels, and with the wave count finishing up, at least a short term decline is way overdue. That decline will help me determine the larger trend.


S&P 3min Chart




The above chart shows the late day decline counted as a 5 wave drop. This count is not perfect, and it's such a small timeframe, so I don't give it much confidence at the moment. I just wanted to post it as a possibility, and for something to watch as we move into tomorrow's trading. If we get a nice 5 wave drop tomorrow while holding today's highs, then it will really get my attention.


S&P Alternate Bullish Interpretation




This chart is one of the reasons I'm not too confident in the bearish 5 wave drop count I posted just above this one. The late day decline today can also be counted as an ABC affair, which is just a correction, meaning that higher levels are right around the corner.


So what all this stuff mean? Tough to say at this point. It's been extremely disappointing to have several fakeouts to this market crash over the past few months, and we just had another one to add to the pile. But catching a possible decline that's the biggest of the past 100 years will not be easy of course. I was hoping that if we did make new highs this year on this rally, that some indices would lag behind and not make new highs, creating a divergence between indices that often accompany major tops in the market. That didn't happen. All the major indices have confirmed the rise and are looking "strong". So I really don't see anything big time bearish at the present moment. We'd have to look back at the 2007-2009 5 wave decline for the bigger bearish picture. That 5 wave drop is yelling at us elliott wavers that larger trend is still down. The hard part is determining when it will resume that downtrend. Right now I see no evidence of that happening, and I don't want to get my account blown out of the water hanging on too long and getting "faked out" time and time again. I'm not abandoning the bigger bearish picture, I'm just presenting the data to you as I see it. I don't see any evidence of the large decline on the horizon. But maybe that's exactly the contrarian setup we need for the top to actually happen. We'll see. I'm not putting any new money to work though until I get some kind of confirmation of the larger trend.

The bottom line is that I remain neutral until I see more of the structure unfold.


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 Continues Higher

Saying that I'm frustrated that the market keeps floating higher despite me saying it's topping the past few days would be an understatement. But the market likes to slap me around from time to time. This rally looks very impressive and strong as far as price goes, but internally it's not the same picture. I've laid out some of those details in previous posts. Today's rally had mediocre sized volume but it was mostly all to the upside with over 81% of NYSE volume going to the upside. Yesterday's failure to gather momentum on that modest drop and then rally into the close was a good sign that we'd get continuation of the rally today. The fact that 81% of the volume today was to the upside may mean we will still push higher. Unfortunately I can't take a position either way right now as I see the market topping anytime but have no confirmation to get short, and I see no evidence to get long at the moment. So even though this has made me miss getting long this rally up to this point, I still have to stick with my trading plan and stay out until I can get a clearer picture of the market.

What might be of interest is that pretty much all of the major indices have made new highs on the year except the Dow Industrials. If the market were to reverse and turn down while this divergence remains in place, it would be very bearish. But the Dow is quite close to making a new high, and if it does so then it will put all the major indices in line for a very healthy rise with no end in sight. So I plan to wait and see how the market reacts in the coming days to see if I can get enough evidence for a bias to take a position.


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.

First Signs of Top Forming....Tip of the Iceberg, or Another Fakeout?

Nasdaq 100 Trendline




Above is a screenshot of the Nasdaq 100 30min chart. It shows a not so perfect trendline that has held the market up the past few days as it's bumped down on it several times but failed to break through. Although I don't show it here, the SPY shows a increase in volume surrounding the trendline break in the NDX, but has since tapered off as the market has continued to fall. Also notice (blue circled) that the indices that led us to the upside the past week or so, the Nasdaq 100, Composite, and Russell, are all leading on the way down now as their percentage losses are about double the losses of the S&P and Dow. Also notice (blue circled) that the "market bellwether" Goldman Sachs is down over 2.5% today. When Goldman, the small cap indices, and tech all show signs of exceeding weakness than the Dow and S&P, it should be paid attention to.

This by no means is a signal to get aggressively short. I'm merely pointing out what I see that may snowball into something greater. No confirmation or five wave drops have occured yet, so I still remain neutral in the short term. But this behavior this morning so far has gotten my attention.


AUD/USD




Another thing worth noting is the breakdowns appearing in the majors. Although I don't see any completed 5 wave decline yet, I do see a rolling over of the EUR/USD and AUD/USD, and the GBP/USD appears to have topped and is completing a wave 4 and soon to be wave 5. The AUD/USD has lagged a bit to the downside so it might create a good opportunity to get short with a stop at the previous swing high above 0.9140. I would trail my stop down as new swing highs are made. As long as the series of lower highs is maintained, this pair is bearish, and I'd like to be short it. The EUR/USD also presents a good shorting opportunity but the risk is a bit wider. So this means I'm now short term bullish the US dollar, and that means I'm bearish the GBP/USD, EUR/USD and the AUD/USD.


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.