Thursday, April 30, 2009

Bulls tried, but couldn't get it going...

So let's see, how does the joke go? How many failed breakout attempts does it take to make a bull say uncle? Well, yesterday was #1, and today was #2. Back to back. Whatever short squeeze they were looking for never materialized. Instead, they got batted down hard below a very key level: 876. You see, that was the high of the day at the last opex and the previous rally high. Yesterday poked above it, but closed beneath it. Today gapped above it, but closed beneath it. I think the party is over folks.

We should gap below our trendline tomorrow and never fill the gap unless of course the bulls don't want to take advantage of the price now and start exiting positions. It is key to not forget the number of leadership stocks/sectors (that I follow as I'm sure there are more) that were unable to ever break to new highs:

- sectors: healthcare, financials, and utilities
- leadership stocks: aapl, amzn, rimm, gs (and I think most if not all the major banks)

My eventual (hopeful) target for this wave B is the 786 retracement of this rally (SPX 714). I know I'm ambitious but I think it would give the most pain to the most people. Our first major bounce will likely come in the 780-800 region.

BTW, I did get short at ES 884 and added to my aapl puts. I'll start unloading the puts as we get to ES 820. Not a lot of time left on these, and I would like to salvage what I can out of them. The aapl puts should be huge winners but I'm doubtful on the rest.


  1. Rich,
    I'm wondering why this wave is counted with a, b, w, x, y waves instead of what appears more clearly to me as 1,2,3,4,5. Waves 1, 3 and 5 even contain a sub set of 5 waves. It seems like a classic wave pattern, but I'm guessing there is some technical reason for this count.


  2. Bob, good question. After relooking at all the structures (after the fact), you are right. There is a way to count the waves w/o breaking any rules. See my new post.