Thursday, March 19, 2009

At a minimum, we should have volatility tomorrow

With a double top this morning, the market finally started to give up some of its gains, but not too much. The downside action has hardly been awe inspiring. With price on the spx now overlapping our w1 (even if it was ever so slightly), I think odds are building that this wave will end up being impulsive. But the bulls don't have it yet. We still need a down up move to call it five waves. The 38.2% retracement on this w3 sits right on support at the 753 area, which was our previous 4th wave of a smaller degree. This is where I'll exit my shorts and possibly enter a swing trade up to at least a marginal new high before we put in our massive wave 2 retracement. If this is indeed some part of a corrective wave, then 753 won't hold much support and will be broken after a small bounce.

We see that this move was rejected off the trendline (see above chart). This is a sign that we should at least get some good downside tomorrow.

Here we have our two counts. Both require some more downside tomorrow morning. The bullish (above) and the bearish (below).


  1. I think the FED has thrown a monkey wrench at the forces of nature, and caused a distortion. Hopefully we will get our bearings again soon.

    Thank you for sharing your work.

  2. Rich,

    My data feed says there has been no overlap with w1.

    Low of w1 was 804.3
    The highest that this upmove has reached was 803.24.

    No overlap, so no EW rules violated for the impulsive case yet (but not looking as likely now, admittedly).

  3. Bob, agreed they have done that in the past causing exaggerated market moves, but then the trend continues.

    johnboy, good catch. We'll see if we start getting an impulse move down, so far it is a bit sketchy, but if we break through 753, then we may have a case.