Triangle Now Looking Unlikey, Look Lower for Stocks; Euro Downtrend Back on



Internals today were very bearish indeed.  And I'm sure that's little surprise considering the market's price action today.  1.7 billion NYSE shares traded today which is substantially higher than what we've seen accompany the rally the past few weeks, and 95% of total volume was to the downside.  Clearly an overall across the board bearish today.  But looking at the bigger picture for proper wave degrees is key here.  Although today's internals were solidly bearish, they are not nearly as bearish as what we saw in Minor wave 3 down.  This further strengthens the current wave count we're tracking which suggests the current decline is a Minor wave 5 since EWP states that 5th waves are often accompanied by reduced momentum compared to the previous 3rd wave at the same degree.

The S&P declined in 5 waves into today's low suggesting a relief rally is possible tomorrow.  Although I would definitely not get long here, I'd just prepare for a quick wave (ii) rally possibly.  The S&P also paused near the end of Minor wave 3 as well as round number support at the 1100 area.  I have little doubt this level will be broken soon so any rally we get Friday or Monday would be a good opportunity to add short in my opinion, as long as the wave ((ii)) high is not broken.

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MY POST FROM THIS MORNING:

The S&P broke beneath the wave ((b)) low proposed in the triangle, negating the triangle the way I was recently counting it, and most likely negating the triangle count overall no matter how you want to count it.  The Dow and S&P have broken the series of higher lowers this morning suggesting their downtrends are back underway.  The Minor wave 3 low has not been broken so stocks should fall further.  There's always the possibility that the markets are just undergoing a complex triple zig zag which means more rallying on the way, although I very much doubt it.  Either way, with the Dow dropping almost 700 points in less than two days be prepared for a possible relief rally soon, I'm favoring the short side until we get a new low beneath Minor 3 regardless.

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The financials have already broken down to a new low, perhaps leading the overall market like they often do.

1.4000 has been an important support level for the euro in the past so I thought it would do a better job testing its underside before resuming its downtrend.  It didn't even touch 1.4000 before it topped, reversed and made a new low.  Perhaps a sign of how strong the current downtrend is.  The larger trend in the euro still appears to be down, I see no reason to abandon the short side.

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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.