Wednesday, May 13, 2009

Follow through, it has been a long long time

The bears finally did it. They followed through. They certainly left me hanging there yesterday with a close right on the support line. But with today's opening gap below yesterday's close, that's all we needed to see that our primary wave A is very much likely over.

Now the question, how low will we go before a pullback. I think we may reverse tomorrow, and here is why:
- There was a lot of buying near today's low. So much that we never were able to pierce the low put in before 11am PDT.
- We are coming up on wave parity at SPX 880 with an exhaustion target at 868.
- Opex weeks have generally been bullish.

I would not be initiating any long positions, however, in an attempt to catch a bounce. Instead, look for a bounce to be an opportunity to load up. 2x/3x inverse funds and June/July puts is what I'll be using. My June xlf puts are already doing nicely along with my IWM June puts. I'll be looking at GS and AAPL puts too along with adding big time to my current QID position. I don't think a bounce will get much higher than SPX 915-920.


  1. Rich,
    Thanks for your work. Was long BGZ from Monday and sold at S&P 883 for a nice profit this afternoon. It is just too risky to play the upside here. Hoping for an early rally tomorrow to find an entry point for BGZ again. Pesavento says 803 is the next low on the S&P??
    I would like nothing more than that. Charts look great.

  2. Randy, while it could just fall apart from here, options expiration has a history of last minute rallies, so that is where I expect to add substantially to my short position. The 800 zone I think is the next stop, but I think it will just be a bounce.

  3. RIch...Tom in Wilm...I know that you follow Tony C to some degree; and it sure would be helpful to see a "Projection" of EW counts possibly out to the end of 2009. One minute I get the Primary vs Major waves etc...then it seems to get all crazy. Would you have the time to take a Daily Chart on the SPX and run it out to the end of the year and label the potential count (waves) for us?

  4. Are you still seeing wave B down to the 800 area and then C up to 1050 ? Investing in the trends for my mutual fund when markets going up and out when going down. Personal investments are much more frequent. Getting smarter all the time!

  5. Hi Rich,

    I am trying to understand your wave counts. You lavelled the move from SPX 667 to recent highs as A, followed by movement downwards to perhaps 720 as B and then i assume another wave upward as C. Are these waves major waves in your primary wave B? Primary wave A was 07 highs to march lows for most elliot practitioners.

    Some believe that Primary Wave A ended in March followed by Primary Wave B which ended last week and we are now at the start of Primary Wave C which will retest march lowes and lower. From your wavecount, it seems that you think we are just in the middle of Primary Wave B.

    Can you help explain your perspective to me.