Corrective Rally Ending/Over, Huge Selloff Coming; Feb. 4, 2009

The above S&P 1hr futures chart shows the rally possibly over as it bumped against the 61% fibonacci level and reversed this morning. Plus, as you can see the MACD is showing a bearish divergence as it never made a new high after the initial surge early Monday. So far, there is very little follow through from yesterday's big rally. Plus, yesterday's breadth was not impressive at all with not even 2-1 NYSE advancers to decliners and now today's rally has the same composition. Also, I noticed the last two huge selloffs were preceded by a huge astonishing surge in the Nasdaqs a few days prior to that happening. Monday and today have seen the Nasdaqs absolutely surge just like the times before. The setup is right, a top is in, or is coming very very soon and a massive selloff that should easily break right through the 2008 lows is coming.

I'm fully short right now.

Short Term Correction then More Heavy Selling; Feb. 2, 2009

Not much new to add, the bigger picture tells me quite clearly that new lows beneath those established in 2008 will be broken, most likely in the next couple weeks. The 15min S&P futures chart shows a clear corrective looking rally which means 805 will be broken at a minimum. With the larger picture so strongly bearish and heavy heavy capitulative selling just over the horizon, I'm shorting this rally with my remaining available cash.

Again, the S&P cash index low of 740 will be broken soon, most likely within just a few weeks.

Top is in; Feb. 2, 20009

A top is in the stock market and 876 S&P futures should be tested at all before 2008's low is broken. The wave count suggests a 3rd wave could be unfolding now. So I'm aggressively short and will add to my short on rallies until 741 S&P cash is broken.

Top Probably in at 876 S&P Futures; Jan. 29, 2009

A top is probably in as today's reversal after our brilliant government came out with a double whammy yesterday with the Fed announcement and Congress passing a stimulus plan that's finally out of the way. Breadth was solidly negative today on the NYSE so after all the hype, nothing but sellers essentially entered the market today. The decline so far appears impulsive, but still has some sub-divisions to go before it can be confirmed. Plus, it appears yesterday's high is around the 50% fibo level from the previous decline (see 15min S&P futures chart).

Bottom line: most likely a top is in for the stock market, so the S&P will break its 2008 low of 740 before it even thinks about breaking the 876 futures' high from yesterday.

Hitting Ceiling at 865 Now; Jan. 28, 2009

The S&P futures are hitting the cited ceiling level of 865 I mentioned last night in my previous post. I can't say for sure if it will hold or not, but breadth is extremely strong as almost no one is selling this morning. This has been typical on Fed meeting release days though. The key is what will happen after the meeting. Once the Fed hype is over, whether it be this afternoon after 11:15pst, or sometime later in a few days, the market will resume its downtrend to new lows.

One Last Pop Before Doomsday; Jan. 27, 2009

The market has been trading choppy and sideways and I've been patiently awaiting signs for a top to be in. I don't have them yet, but suspect they'll come soon, perhaps this week. The chart above shows the clear decisive smooth selloff downward and the very hard faught choppy modest ensuing rally. This screams out to us that the trend is still down. Losses are easily acheived, while gains are hard faught and barely achieved at all.

The big question is when? Well tomorrow the Fed meeting results come out, whoopty-doo. But as usual, people buy into the Fed meeting, and looking at the rally in the futures right now, this meeting is no different. Interest rates are essentially zero so I don't know what all the fuss is about for this meeting other than it's speculators pushing the market higher only to sell as usual shortly after the meeting. The bottom line is that this rally we're about to undergo should be short lived, and I'll be aggressively shorting it the whole way up. Once it tops, which could be in the S&P futures 865 area, it will lead to the next wave of fast and ferocious heavy selling.

The short term picture is unclear, what is clear is that this rally is a correction, and that the S&P low of 740 will be broken in the coming weeks.

S&P Futures Confirming Short Term Call From Last Post; Jan. 25, 2009

As you can see from the above futures chart posted early Sunday afternoon, the outlook I have from the previous post for the very short term has played out. The ascending blue trendline was broken through late Friday and then the market tried to rally above it again and bumped underneath it several times before the bulls finally gave up and sold off the market in the last few minutes of trading. Now we see Sunday has continued that selling. Now this is a very short term chart and indicator, only 5min, so it's far from certain this will continue throughout the night and into tomorrow morning's US session. If it does continue to sell off, then the 750-775 area are the immediate levels of support to watch for.

Short Term Bearish Setup; Jan. 22, 2009

Here's a 5min S&P futures chart showing an ascending blue trendline that held the rally above it all day today. Late in the day the rally then ran out of steam and started to fall, causing the S&P to break through the trendline and trade below it. As typical in breaks of trendlines, the index then rallied to try and break through above it again, but after several attempts (see red circles at top), the bears took over and sold the market off lower. This short term minor technical indicator may be a sign that this short term rally has ended and more heavy selling will occur, taking the index below 800. But again, this is just short term speculation so I can try and grasp where the market is going in the near term. My stance is solid that the market is in a corrective phase, and when it's over it will send the market well below 740 in the S&P cash.

As for the short term setup above, we'll see Monday how it plays out.

Another Wild Day; Jan. 23, 2009

Another wild and unclear day for the short term picture. Right out of the gate this morning the market fell sharply and everything looked to be going as planned. But then it spent the rest of the day rallying. Again, making things a bit unclear in the short term. With all this choppiness and lack of clarity, it tells me we are in the middle of some type of correction. The bottom line is that the larger trend is still down until 740 in the S&P is broken. So I will use rallies as an opportunity to add to my short positions. Ultimately, 943 in the S&P should not be even close to being tested before 740 is breached.

Bottom line: with short term structure unclear, but larger trend remaining down, I'm shorting rallies until 740 is broken.

Wave Structure Unclear, but Trend is Down; Jan. 22, 2009

The stock market has not be following my projected paths laid out in the previous posts telling me that something else is unfolding. Momentum indicators, breadth, and the wave count are all giving unclear and/or conflicting signals. This tells me it's likely we're still in some type of correction, whether it's in a B wave down, or some type of triangle at some degree is unclear. The one thing I'm fairly certain of is that the larger trend is still down, and 740 in the S&P will be broken. So my strategy is to remain about 50% short, and add short positions to rallies or when wave structure clears up in preparation for a break of 740.

Once 740 is broken, a significant bottom, or THE bottom could be in at any time. So I'll be working on exiting short positions and getting aggressively long for a multi-month or multi-year rally.

Rally to 870-900 Then Massive Selling to Below 740 Quickly; Jan. 21, 2009

Yesterday's 300+ down day was very unexpected and threw a wrench in an otherwise perfect setup. The rally I called for on Sunday's post was delayed by a day. We are now in the rally phase that should take us to the 870-900 level over the next few days or couple weeks. From there, we will give way to a large wave 3 down that will run right through the 740 low of 2008 and probably well down into the 600s. This rally phase we're currently in is giving me an opportunity to add to my short positions as it rises.

I do not want to miss the next selling phase. It should be feroucious, and should be somewhat similar to the October selloff, only not as large.

The Market Gods Have Given us a Gift; Jan. 18, 2009

Once in a while the markets trace out a structure early which tells us with high probability what's unfolding in the bigger picture. This is that time. Above is a 15min S&P cash chart showing a clearly corrective rally that started on Friday. You can see an indisputable 3 wave rally off the 817 low. Then the market declined beneath the previous low in the 833 area. This makes it impossible for a series of 1's and 2's to be unfolding and some type of impulsive 5 wave rally to occur. It is clearly corrective. Getting this data so early in a market move is so valuable. This instills great confidence that the market will make at least a new low beneath 817. So in my opinion, I now want the market to rally strong and high, because it will allow me to short bigger and at better positions as it does so, therefore making me more money. As long as the market trades above the 817 low, it's a correction and I'll be shorting it.

I see this coming rally and ensuing 3rd wave decline as a great opportunity for us ellioticians to make some big profits in the coming weeks. This should be the best setup for us since we made a killing predicting the crash in early October. The setup is coming....

Large Strong Rally Phase Underway; Jan. 16, 2009

The market rallied too much since my previous post for the count to remain valid. It's clear the decline was impulsive, but the exact labeling was uncertain. So I relabeled the decline to show 5 waves down complete already. This is probably a wave 1 at some degree. Which means that a strong fierce wave 2 should occur now. This lines up perfectly with Obama coming into office Tuesday, and the Obama euphoria carrying over to the stock market and causing a rally. But 943 in the S&P cash should not be broken or even tested. My projection in the coming weeks is shown in the 1hr chart above. I see a 1-2 week rally occurring to just under 900 in the S&P. I took off some of short positions yesterday and today once I saw the selling pressure alleviate. So I will add those positions back on as this market rallies higher in the coming days/weeks. Ultimately, 943 should not be broken, and the market will give way to a large wave 3 down. That will be the prime opportunity to make big easy money fast!

I'll try to identify a top when it comes, but I'm shorting this coming rally anyway.

Stock Market Declining in 5; Jan. 16, 2009

Yesterday's sharp rally is typical in a bear market, but appears to be short lived. With the decline this morning, it has created a clear 3 waves up on all the major indices. It could unfold in a more complex correction by rallying more, but it will be just that, a correction. The above chart shows a possible 5 wave decline unfolding. It's even possible to count the drop into yesterday as a 5 wave decline, which would have the rally yesterday into this morning as a wave 2 rally. But that would mean we're in a wave 3 down now and the market internals and movement does not support that. So I favor the above count for now.

Nothing has changed in my forecast. The market is on its way to breaking 740, the low of 2008.

Massive Selloff Possible Tomorrow, or Later This Week; Jan. 14, 2009

The market's internals today finished horrid, but slightly better than I described in the middle of trading today in my previous post. The calm and orderly nature of the selling is the worst scenario the bulls can get. Panic selling and chaos usually creates bottoms, whether short or long term. That didn't happen today. Not only that, but a late day rally in the final minutes pushed the indices off their lows. Again, this is not good for the bulls in the very short term. Because of this, I feel any rally this week will be short lived and quickly reversed and new lows made. The longer the panic and fear stays out of the market and the selloff stays this orderly, the more likely this market will continue much lower in the coming weeks with little rally relief.

Above is a daily S&P cash chart showing the break of the important 850 level which has held the market up several times in the past. The market has told us this is an important level. So today's strong break on weak internals and close beneath it tells us the market wants to go much lower. Also notice the MACD has shown weakness (red descending trendline) throughout the entire rally phase over the past weeks and is now rolling over to the downside. There is still plenty of room for the MACD to fall too, along with many other momentum indicators. This market is overall bearish. 740 will be broken in the S&P soon, and will probably trade well into the mid-600s by summer 2009!!

I'm still about 75% short overall.