If Wave (ii) is Over, then Look out Below Next Week....

S&P Cash Index Top Daily Count




There's a lot of evidence to suggest that wave (ii) of 3 of [3] or C is over and that a wave (iii) of 3 of [3] or C is now underway. Although it's not confirmed, and we've had many fakeouts of major selloffs in the past, the evidence still suggests major selling could be getting underway right now that should be very devastating to the markets in the coming days/weeks. Above is my top wave count for the S&P showing what I'm talking about, and it gives an idea of the magnitude of decline we may be undergoing right now.


Market Internals




Above are the market internals from Scottrade after the close. Today we had 99% of total NYSE volume trade to the downside, 90.6% of all NYSE stocks closed down, and although I need to confirm this but Scottrade is reporting that absolutely no stocks closed up in the S&P 500 today. (If anyone has any supporting or refuting data on this please let me know - thanks). I've never seen that before. So today's internals are some of the most bearish I've seen in the past few years. It fits well with a wave 3 at multiple degrees being underway right now. So this is a strong piece of evidence for the bears here.


Dow 10,000 Taken Out




The above weekly chart of the Dow shows how important the 10,000 level has been. It's probably just more of a psychological and news media driven number that ends up being a self-fulfilling prophecy. But nonetheless you can see that it's been pretty important the past few months. So as I said this morning, I wanted to see the market take out this 10,000 level convincingly. Today it did, and then it closed below it on some of the weakest internals I've seen in years. So this is another piece of evidence for the bears.


S&P Broke Uptrend Today




Today's decline in the S&P also broke it's uptrend since wave (ii) started by making a lower low beneath the two previous ones. This is basic stuff; by breaking the series of higher lows, the uptrend itself may be broken. When this is combined with the Dow closing below 10,000 all on solid volume and extremely weak internals, it all lends itself to the bearish case.


Silver ETF




Lastly I wanted to show a nice silver chart here shown through the ETF (SLV). Silver is important to track with the market, along with some currencies, because it is tied to risk and therefore their moves are often correlated to the stock market. So we can sometimes get a good clue about what stocks will do in the near future, or get confirmation of a trend change. As you can see in the above daily chart, the SLV has made what looks like a clear head and shoulders top. If so, then this metal should be headed sharply lower. And with the extremely bearish setup in the stock market the way it is right now, this means a lot of trouble in the coming days/weeks for almost all asset classes.

Summary

With all that said, we've seen a lot of fakeouts in the past few months so I still have to be cautious about getting fully short until the market fully proves to me that wave (iii) is underway. Ultimately that will take a break below 1040.78 in the S&P cash index. But the evidence is definitely aligned right now with the bears, and it appears that 1040.78 getting taken out is just a formality at this point. Should be an interesting week ahead.

Side note: I know a lot of folks liked the Yahoo Prechter video I had up on the top right of the blog so I just wanted to let you all know that I posted a new one today.

Have a good weekend.


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'm watching Dow 10,000

Above is the USD/JPY which has been tracking the stock market lately since it's tied to the risk trade. It appears to be declining impulsively from its high as you can see. So this is something to watch because it may be telling us that the trend has turned down in the stock market as well. But still, we need some confirmation.

I'm watching the Dow 10,000 level since the market continues to bounce from this level and is actually sitting right on it as I write this. A strong break below 10,000, and especially a strong close beneath it today, along with the S&P breaking below 1070 will be a good indication that wave (ii) might be over. The market has been wild lately and has faked out the bears a few times lately, so I still want to see 10,000 wiped away, and the series of higher lows in the S&P be taken out with a move below 1070 before I start really thinking wave (ii) has ended.


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 (ii) Should Continue Higher

The market didn't do much today, so there's not much new to add from yesterday. The current wave (ii) may morph from a double zig-zag (WXY) into a triple zig-zag (WXYXZ), but I'm targeting the upper end of the 1105-1120 range for a possible finish to wave (ii) regardless. Today the major indices poked to new highs from last week as expected, with the Nasdaqs strongly leading the way. Despite today's somewhat flat move in the Dow and S&P, the market is still showing some solid bullish underpinnings. The market should continue higher in the coming days. The market overall has not done much other than slightly recover on the lows established last week, and then move almost sideways since then. If this continues, it shows how strong the downtrend is and how weak the bulls are since the only thing they can muster in a week of rallying off the bottom is a fraction of what was lost a week prior. It will also continue to help alleviate the strong oversold condition the market was left in from last week.

So I'm keeping an eye on the bigger picture with the chart above. The wave (ii) rally should continue to work higher at least into the 1105-1120 range in the S&P cash while staying below 1074. I'll add to my shorts as it works higher.


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.

Market Flips to Short Term Bullish; More Upside in Coming Days

Daily S&P Cash Index




Just when you think you have the market solved......sllllllaaap! Right across your face. Almost all technical analysis methods I use pointed to lower levels today except one, Elliott Wave Principle.

If you look at recent pullbacks in the past few months you'll notice that many large corrections were kicked off by a long reversal candlestick wick like the one from last Tuesday (I'm not showing all of them). Today we have a huge and strong bullish candle that closed on its highs above yesterday's open. Very strong internals also accompanied this candle as well, suggesting it's part of a 3rd or C wave. This is very bullish and suggests we have further strength in the market to come. Today was a solid victory for the bulls. At least for the short term.


S&P Intraday Wave Count




The decline from last Friday has been very choppy and sloppy, and despite that other technical evidence may suggest it was not a correction, EWP would have one conclude that it was in fact a correction. Well it appears EWP won here because the move from last Friday seems to quite clearly be a correction. So wave (ii) continues higher. I have wave (ii) counted as a WXY combination correction. Today's surge was the start of wave "iii." of "C" of "Y". 1105-1120, probably closer to 1120, should be good resistance for this rally. Since it's a wave "C" unfolding here, we should see a clean 5 wave rise to that area. If the 5 wave rise appears complete near the 1120 area, then I'd be looking for any weakness to add to my short positions. Ultimately, the rally should be capped below 1174 in the cash index, so my stop losses are placed just above there. Any break above that level would create what looks like a clear 3 wave drop from the highs on the year, and put those highs at severe risk of being taken out.

So today's actions strongly suggests the market has further upside for wave "(ii)". Once 5 waves unfold completing wave "C" in the 1105-1120 area, then wave "Y" should be complete as well, and therefore a large reversal may be at hand. I'll be adding to my short positions as the market rallies as long as it stays below 1174.


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.

Evidence Quickly Building that Wave (iii) is Underway

Stock Market Internals




There's a lot to go over today but I'll try to streamline it so it's easily consumable. For proper context of larger wave structure for wave (ii) please check out my last post from Friday, or at least check out the chart from there by clicking here.

So most of the day the Dow was positive, showing some strength in the market as it shot off the lows from early this morning. The wave structure looked very sloppy as the decline since Friday has been a series of overlapping waves which is characteristic of a correction. But the internals of the market looked horrible. As the Dow was up about 40 points the NYSE was down 0.50%, and there were significantly more decliners than advancers and down volume was well exceeding up volume. Goldman Sachs and the XLF were also weak. I put the primary focus on wave structure so I thought we'd get a quick pop higher, led by the Dow, to new highs from Friday and then the market should reverse sharply from there, possibly ending wave (ii). But that obviously didn't happen as the pull of the market was too much as it tanked hard into the close, even pulling the resilient Dow down triple digits into the close. If you look at the internals above you'll see that today was a big down day, despite the Dow only being down modestly. The S&P only had 21 stocks close up, 79% of stocks on the NYSE closed down, 92% of total volume was to the downside on the NYSE, and all this was done on decent volume overall.

As you'll see below, the market today was solidly down despite the Dow's resilience, and the behavior in the Nasdaqs, Russell 2000, and VIX tell me that people were aggressively moving out of high risk assets and into "safer" assets. Most of which are in the Dow, hence it's relative strength today. All-in-all, this is bearish when risk aversion starts to creep back into the market and it's a nice setup for wave (iii) of 3 of [3] or C to get underway.


Nasdaqs Make New Highs While S&P and Dow Do Not










Above shows another bearish scenario that occurred today as the Nasdaq 100 and Composite both exceeded their Friday highs while the S&P and Dow did not. This last surge in tech may be the usual surge higher and reversal that occurs at market tops at a larger degree. The fact that the Nasdaqs made new highs, then closed deep in negative territory on the lows of the day is very bearish in my view. And when you combine the fact that the Dow and S&P did not confirm the Nasdaqs' rise, it makes it even more bearish.


Nasdaq 100 Count




So the Nasdaq 100 sports the best EWP count of all the major indices in my view. This is mainly because it made a nice new high today and then declined impulsively after that. The other indices' declines are very choppy and tough to count on the intraday charts at this point. Above is the simple wave structure that might be unfolding right now in the NDX. The S&P breaking below 1066 will be even further evidence that wave (iii) is underway, and a break below 1040 will all but confirm it.


The VIX's Ascent




I'm not a VIX expert, but know enough about it to see that over the past two days that fear has been steadily creeping more and more into the market. Despite the stock indices moving somewhat sideways or choppy Friday and today, the VIX has worked itself decisively higher. So on the surface people may see a strong Dow that flipped to modestly down at the close thinking this is just a normal pullback in a new bull run to new highs on the year. But underneath we see very bearish internals, a bearish divergence with the Nasdaqs, an impulsive decline developing in the Nasdaq 100, the small caps and financials taking a big beating, and the VIX shooting higher. So to me, this market is looking very bearish, and barring a big across the board bull surge tomorrow, this market should be headed much lower. Again, 1066 in the S&P is the first target, then the 1040 level.


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.