Sunday, September 6, 2009

Next stop...970

Tuesday is an important day as it marks the first day of the high volume trading. With summer behind us and the long holiday week, the big boys will be back and will put their stamp on the future direction of the market. September 1st was the highest volume day on the ES September contract I have on record. Thursday and Friday were both up days on pitiful volume. The last time volume was that low was 8/10. 7 days later the ES was 30 points lower.

But with the market very nearly off a technical cliff (see top charts), 30 points lower from here could bring an avalanche of selling, so we'll watch the developments closely.

The market was able to mess up my primary wave count (although when does this not happen?), so I have before you my next best counts:

This scenario shows the start of an a-b-c correction last week with expected downside action to end in the 950-970 area before the market moves to a new high. This would essentially make the corrective move into a triple zigzag and a projected top somewhere in the 1050-1070 area.

Either of these counts is bearish and essentially is setting the market up to move to new lows. The ending wave action will be impacted as the market will make a couple of 4/5 waves to make the pattern complete. In this scenario we should see persistent selling next week with an eventual break of both 970 and 950 for our early confirmation and a break of 870 for our final confirmation.

Fast your seat belts and keep your arms in the vehicle at all times. It should be a wild week!



    i have 975-980 at major support (next stop)....
    its gonna be interesting with some VOLUME back.

  2. nice work Rich. I alway like your analysis. One curious variation, could this market be moving up in five waves to complete p2 currently having completed 1 and 2 now going up in 3 headed toward your bullish count top? I hope not! as I am loaded up in sep and oct puts, also short many call spreads. i see the light volume, etc. but strong overseas markets today and the es moving up as well. Just seems like a lot of resistence at 118 - 126. any opinions?

  3. bobbyd - certainly anything is possible. However, from an ew perspective, the personality of a 3rd wave is high volume and high momentum relative to the 1st and 5th waves unless of course it is the 5th wave extending and not the 3rd. Without some kind of high volume confirmation, I just put the action of the end of the week in the low consideration bucket as there has not been any volume to confirm the move. For all we know the big boys are trying to run as many stops in light volume as possible before pulling the plug tomorrow morning. I guess we'll know sure enough Tuesday morning.

  4. No volume in Europe stocks today either.