Friday, August 14, 2009

Monday is a critical piece to the puzzle

Today began to unfold just as my bearish scenario layed it out. A top at the open and a very strong down move. Once again, the bears walked away from a wounded bull without the finishing blow. How often have we seen this: the bull nearly dead after a couple of hours of trading, then a lull sets in and by the afternoon session the bull is back alive like nothing happened. From here I see two most probable scenarios:

The Bull Dies on Monday
In this scenario we likely gap down Monday morning and never look back. Although the market could still test the 78.6% retracement around 1009. The key to this move will be a confirmed break of today's lows and then Monday's lows. This will be a 3rd of 3rd wave and these are always very powerful.

The Bear Tries and Fails on Monday
In this scenario the price action should make its way up the 1009 area and sell off once again. The selling should dry up once again somewhere around 1000 and reverse very strongly. This price pattern is a wave b triangle and it will be quick and powerful to the upside. Price, however, should terminate somewhere around 1020-1030 based on the triangle's structure. The other thing to remember about a triangle is that once it finishes the reverse is also a very quick and powerful move. This should be the very end of this bull run and should lead to sharply lower prices if not new market lows.


  1. Rich, I want to complement you on your charts, and the your daily analysis. Your charts are clear, and wave degree is consistent.

    I like the way you back up your analysis with good reason, and often present some very interesting concepts along the way. Your recent post in the Boston Wealth was terrific. Really good work!

    I would recommend keeping a blog to all traders. It forces you to double check your analysis. I know it's made me a better trader.
    But until I became publicly accountable for my charts, I did not understand the effort required to write a Blog. Just keeping the wave degree in check can be a challenge.

    So now that I know what it takes, I appreciate your work even more. Thank you for sharing your gift. I wonder if EWI reads your Blog.

  2. I like your work also, keep it up..nick

  3. Bob / Bearnic - thanks for the nice words. I always try and keep it simple and straight forward. This has been a tough market on the bears, but it will give it all back once the bulls have no more money left to buy ;-).