Big Market Move Ahead, Trend Still Looks Strongly Down; June 23, 2009

The market did nothing today, probably a "wait-and-see" approach to the Federal Reserve meeting conclusion and public announcement coming out tomorrow late morning (PST). There are various ways to interpret the short term wave structure and outlook but I don't want to get too caught up in the minor ups and downs in the market because the important point for trading is that the larger trend appears to be firmly down still. I think the 880 S&P futures level might offer a good support level, although the wave structure suggests that this level might get blown away soon.

Today's sideways action can be interpreted as a triangle in the S&P and the Nasdaq composite. Triangles only occur in 4th waves and B waves. The current market conditions suggest a B wave which should be followed by a sharp thrust upward in a C wave. But triangle thrusts are terminal, or finishing, moves. So that rally will be quickly reversed and the downtrend will resume. The other scenario had today's sideways action as an actual correction where the small 5th wave labeled on the 2 hour S&P futures chart above is extending, or it's a wave 3 within C.

All of the 3 scenarios eventually lead to lower levels, and 2 of the 3 lead to sharp big moves to the downside. So I remain heavily short, ready for a brief sharp rally where I can add to those short positions.

I'm currently short Sept. S&P mini contracts, have a bear put option spread on the SPY, and a covered call option position on the SDS.

S&P Futures Shorts Bring in Big Profits; June 22, 2009

If you shorted the S&P futures at the top (952) where I thought we had a nice reversal and a high probability of a top in place then you'd be in the profit $3,200 per contract right now! I personally put in a sell stop at 919 so I'm currently $1,550 in the profit per contract right now on top of my current ETF and bear spread option positions. I've eliminated over 4 weeks of losses in only 6 trading days, and more profits should come for the shorts in the near term from what I can see. As I said in my previous post on the cash S&P index, the selloff was broad-based and very strong, no bulls were really in the market and with 5 wave declines and choppy rallies accompanying that it's quite clear the bears are in full control.

Wave structure suggests we're probably in a 5th wave of smaller degree so a near term bounce may come soon. With my projected target area of 880 only 10 points away, I'm planning on a further decline tomorrow morning to that 880 level where we may see a corrective rally take place. So I will be taking some more profits off the table if the market opens down 5 or more S&P points tomorrow in preparation of that bounce. But the rally should be short lived (depending on its structure) and it will just give me another opportunity to reshort the market again. I do feel we have further declines to go and this could very well be the beginning of the major wave 3 down I've been calling for that sends us into a full blown depression. So I'm on high alert for signs that may be occuring. With that in mind, I don't want to get too cute buying and selling too large of positions on short term moves. The larger trend is clearly down at this point so I want the majority of my position short for the longer term. I am merely playing little pieces of my portfolio on short term moves.

I remain short the Septermber S&P futures, a bear spread on the SPY, and covered call options strategy on the SDS. So I am still heavily short the S&P at this point.

Big Profits Booked for the Shorts Past 6 Days, More to Come; June 22, 2009

The markets continue to fall as planned. Above is a 15min cash S&P chart showing that the market is falling in 5 waves (impulsively) and rallying choppy corrective waves. Breadth and internal strength of the market continue to be extremely weak telling us that the bulls are exhausted and the bears have full control. Technicall, a small degree 5 wave decline appears to be completing as shown above so caution is warranted for getting aggressively short term bearish at this point. However, this was an across the board very strong selloff which tells me most likely we'll see further declines in the very near future before a meaningful bounce. I closed a very small short S&P position today because I feel I just have to take at least some profits when the market falls this much in a day. I will add that position back if the market rallies tomorrow. But as of now, it appears the market will fall further in the coming days or weeks, and I'm on full alert to see if the big wave 3 down is underway or not. Right now it's inconclusive.

Market Unfolding as Planned, 880 S&P Cash First Target; June 22, 2009

Last post on June 18 I projected a sharp rally to suck in the last bulls and finish a 3 wave corrective rally and resume the decline. My target was around 930 cash for the short term rally to end and it made it to the 927 before topping. Then a small 5 wave drop occured Friday and now this morning, right on time, the market is selling off sharply. My S&P cash index target is 880 for the immediate short term, but this market possibly has much much more bearish potential. So I won't be anxious to completely liquidate my positions. The break of 900 in the S&P today caused me to add to my short positions and a cash index close today will cause me to probably add to my short futures position.

The market is weak and can fall much further in the near future. But 880 is the first wall to break down. A strong break in that level can result in a an acceleration to the 800 level.

By being patient and sticking with my analysis and not letting emotion take over my trading strategy, I've gained back over 4 weeks of losses in just 6 trading days as the market stands now.

Probably Small Short Term Rally, Then More Declines; June 18, 2009

The mainstream media (mainly CNBC folks) are way to short term bearish right now to get me to fully dive right into the short side now. So many CNBC anaylsts and articles online are talking about a "short term pullback" that it has me very cautious about the market declining right now. The wave structure still leaves the door open for more time to elapse and higher prices before the next leg down. I am still very bearish in the next few weeks, but I think we need another "pop" rally to get rid of some of those mainstream bearish attitudes in order for the next leg down to get started. Tomorrow is a Friday which is typically a slow day so it's possible we just drift higher all day tomorrow. If not, I expect a sharp ferocious rally that will suck all those short term bears into the market to go long which will lead to a top and reversal. Whatever the method, I still feel we will climb a bit higher in the very near term here.

My chart above of the 15min S&P cash index shows my projection for the market where it rallies just above the prior 4th wave (typical in EWP) to the 50% fibonacci retracement level at a nice round number of 930. There's no requirement for the market to get there of course, it's just my best guess as to what I need to prepare for. I'm about 50% short right now and will increase to 75% short as the market works higher.

The bottom line is that the market is in a decline phase that should take the S&P to the 875-880 area before even considering a bottom. But in the very short term, a rally to the 930 is quite possible.

Wave C Underway, Then More Declines; June 18, 2009

The attached chart shows a typical EWP wave count with a strong wave C underway right now. My projected target is the previous 4th wave area around 924 in the S&P futures and 927 in the cash index. This rally is an opportunity for me to get heavily weighted on the short side again.

Nothing Changed; June 17, 2009

Nothing changed with today's action. If anything it just proved again that even after the Dow losing 300 points in two days, the bulls still cannot gain any control or strength. It's quite possible today is part of an ABC correction which will lead to a sharp wave C rally tomorrow. But that will just bring about a better opportunity to short some more as the ensuing decline should be quite fierce.

I remain staunchly bearish.

5 Waves Down Suggest Trend Now Down; June 16, 2009

The S&P cash index declined in a very clear 5 waves from the top last week. Today's decline was quite weak as far as breadth and declining volume, but not as bad as yesterday. The Dow has lost 300 points in two days and I now see a very clear 5 wave decline which tells me a short term bounce may be on the horizon. For this reason I sold some options against my short S&P ETF position and closed my very short term S&P emini futures position at a nice profit. The break of the ascending trendline on the daily chart I've talked about in previous posts, and now the impulsive clear 5 wave decline in the S&P cash index tells me the larger trend is down and the market should be headed to much lower levels after a possible short term bounce to correct the 5 wave decline.

My initial target for the S&P futures is the 880 level. I remain short the S&P through a bear put spread on the SPY and through a covered call strategy on the SDS. The next few weeks should have this market in a downtrend. So far, the decline is not exhibiting the type of behavior I would expect if the big wave 3 or C down is underway. Regardless, the market is headed lower in the short term.

Trendline Breaks, More Declines to Come; June 15, 2009

The S&P futures finally broke and closed beneath the ascending trendline established for months as shown above. This is what I've been saying would signal the next significant decline phase. This, combined with the very weak breadth as more than 93% of NYSE stocks traded to the downside and almost 5 1/2 stocks traded down for every 1 stock that traded up. Volume was a bit light but that just opens the door for more sellers out there to come forward and push this market down. All this evidence suggests that the buyers have become exhausted and there really aren't any more out there at these levels.

Expect the market to decline to the 880 futures level at least with last week's highs remaining intact.

Stock Rally Severely Exhausted; June 13, 2009

The stock market rally is severely exhausted. The market cannot push higher over the past week, breadth continues to deteriorate, the small cap and tech indices are showing more weakness than the blue chips suggests people are exiting their "risky" assets, momentum indicators did not confirm the recent high in the stock market and several other indices did not confirm that high in blue chips. Usually when the market closes with NYSE breadth negative and the Nasdaqs and blue chips are mixed up and down it leads to a sharp decline shortly after. Well not only did we have that action occur Friday, but it's happened 3 times in a little more than a week! Again, this fractured non-confirmation failure to push higher is signs of extreme bullish exhaustion.

I still await a strong break of the trendline and ultimately a break of that 5 wave rally on Thursday which I feel was an "ending move". Once this occurs, we can be all but assured that a significant top is in place.

I'm short 65% total strength with the SDS (ETF) and a small bear put spread on the SPY.

EUR/USD Declining Impulsively; June 13, 2009

The hourly EUR/USD chart shows a five wave decline and a three wave WXY rally that halted twice at the fibo retracement level. With a stock market top at hand and gold reversing sharply Friday, I like the odds of shorting the EUR/USD here at 1.4015 with a stop at the beginning of the 5 wave decline at 1.4345.

Still Waiting for Trendline Break, Evidence Building of Significant Top; June 11, 2009

The market did a sharp rally today on the Treasury auction news and then reversed at the close. In my 15min cash S&P chart posted above you can see that the rally starting yesterday and ending today created a 5 wave move. This can often mean an 'ending move', such as a thrust from a triangle, for the entire rally over the past few months. I still await the ascending trendline on the daily S&P futures chart (posted above also) to be broken to the downside and closed beneath it. Until then I cannot be certain a top is in. Right now, things are looking good though. A break of the beginning of the 5 wave advance at 928 in the cash S&P would be the first significant signal that a top was in.

Trendline Holds.....for now; June 10, 2009

The trendline was broken midday but could not close beneath it on the daily charts. This tells me the market is short term bullish until a strong break and close beneath the trendline occurs. Regardless, any rallies should be short lived at this point and capped below the 1000 S&P futures level. The sideways action is "triangle-looking" which means one more sharp rally to a new high before a violent reversal. That will probably occur and take out the weaker bears before this market finally declines like I've been projecting for weeks.

Bottom line: the market is short term bullish as long as it trades above the blue ascending trendline drawn above on the daily S&P futures chart, and any rally should be capped below the 1000 level.

Break and Close Beneath Trendline Needed Soon; June 9, 2009

Above is a daily S&P futures chart that shows an ascending trendline that has been resistance and support several times since November of 2008. Obviously the market thinks this trendline is important. Right now the market is trading above it, but is having a very difficult time with any follow-through to the upside. Strong break and close beneath the trendline this week will signal the next decline phase underway with an immediate target of 875, and possibly much further.

The sideways action in the market is not encouraging for the bears because this might prove to be the 3rd time in a row the market corrects itself by moving sideways instead of down. Half of my full position will stop out at 958 in the S&P futures.

Top in, Monday Should Bring Selloff; June 7, 2009

I'm quite confident a top of significant degree is now in on the stock market. I expect the futures to hold overnight down mildly, or even up slightly into Monday morning's US open. Either of which should bring about a good selling opportunity with a stop loss at Friday's early morning highs.

This market is bearish and should fall Monday, and possible most of the week.

I'm heavily short as of Friday.