Elliott Wave Index Trader

Update...

2011-04-05T22:12:00.001-07:00

Not much progress has been made in either direction the past few days. Either the bears take over soon or the bulls will drive this much much higher. The aggressive short would be to short the open if we open below ES 1325. A more conservative short would be to wait for a move below ES 1320. Anything above 1325 at the open leaves the door open for the bulls to run it up.

Option #2 and where we are...

2011-04-03T21:23:00.000-07:00

As the market barely flinched last week at the 786 retracement from the highs, it became apparent that we weren't going to see new lows before we saw the highs tested.

So, that brought another look at the larger count to see where we might fit in. Symmetry between waves 2 & 4 are always something that I'm looking for. Corrective waves are so often a fib ratio with each other. So which corrective wave did this last move down fit with?? The wave 2 flat in a perfect 1:1 ratio. So there you have it: wave 2 flat, and wave 4 zigzag. We got perfect symmetry and an alternation.

Where do we go from here? The obvious is to look for a daily reversal of our 5th wave at key targets.

Key targets:

#1 Friday's high. It gives us a double top, a wave 5 = wave 1 symmetry (I labeled it .786 on the chart but that was because I first measured to the wave b high of the flat), and a perfect turn at the daily rsi resistance line. Any open below ES 1320 is shortable at the open. A daily reversal would be a close below 1325.

#2 Should the bulls come out tomorrow and push this up, then my next target is 1379 or the channel resistance line, whichever comes first. On a weekly basis, I would expect the rsi never to break the 80 level (it closed last week at 65).

Best of luck, and watch for the confirmation before getting aggressive.

Okay - I'm Awake!

2011-03-27T22:33:00.000-07:00

Okay already, I'm back to make an EW count. First off let me say that the bulls are really sticking it to the bears and the last week has been a perfect example. They have driven through resistance lines without even flinching. What value in the future they see, I have no idea, but there are enough of them that they are overwhelming all the sellers.

So, here are my counts:

#1 - We just completed an A-B-C-X and have an A-B-C to go.
#2 - We just completed an A-B-C and are going to take out new highs.
#3 - The market is very very wicked taking in all the buyers in an incredible wave 2 that fails tomorrow and continues to impulse down for weeks to come. I know, not likely, but someone has to put it on the table.

The market has already broken a weak channel resistance line and looks like it may be vulnerable at the 786 retracement zone. A gap down tomorrow is shortable.

Triangle Update

2011-03-09T04:46:00.000-08:00

Yesterday saw what appears to be the last test of the support line and an upward explosion. The momentum was so fierce that it eclipsed the momentum of what I'm labeling the 'b' wave of 'C' leg of the triangle. This will be confirmed with a close above yesterday's highs. Assuming we don't get a 5th wave extension out of the triangle, which I'm not as this rally is already over spent, I would expect the 5th wave to end in the 1354/1360 area based on the size of the triangle.

Update demanded by ME

2011-03-07T19:28:00.000-08:00

Wow, can you get both scenarios so wrong??? Today's move down leaves us pretty much where were over the weekend, except the count has expanded.

Primary Scenario: Triangle has now moved up to my primary count based on the futures movement after hours. An open below today's low would eliminate this count.

Secondary Scenario: Added another subdivision to the wind up today. Tomorrow will open below today's low.

There you have it. Today cost me....

Weekend Update

2011-03-06T20:26:00.000-08:00

I realize there were some violent swings during the week, and I apologize for not chiming in with my views on market action. So, now that I've had some time to analyze the charts, here are my two scenarios:

Primary Count: Monday kicks off a 3rd of 3rd down. It starts with an acceleration gap below Friday's low and possibly below last week's low. This should be pretty easy to invalidate based on where the futures are trading tomorrow morning.

Secondary Count: Friday finished of a 4th wave triangle and began the 5th wave. It only matters that the market opens above 1315 and takes out 1320 within the first 15 min of trading.

The bearish count takes the primary count due to the VIX movement, the weekly reversal, Thursday's double top failure. We soon shall see...

Weekend Update

2011-02-27T22:44:00.000-08:00

Okay, first off I need to apologize for the lack of content. Truth be told, I've been spending most of my 'free' time on my automated trading system. With that said, look for a couple of posts a week to keep the big picture in perspective.

Last week gave us our first decent drop in a LONG time. In fact, we haven't had a weekly reversal signal since 8/13/2010. That one led to about a 90 point drop over 3 weeks. Nothing too exciting. The time before that was 6/25/2010, which led to a 125 pt drop over two weeks. That was quick and short lived...

Our last drop of any bear value was the flash crash that started on 4/30 and lasted 4 weeks after a drop of nearly 180 pts. So as this correction unfolds, we will keep an eye on those numbers.

From a technical perspective the 1200-1220 area is very important for the bulls. Should we get more than a couple of weeks of selling and 125 pts (which puts us in the range), then the bulls are in trouble. Look for a ton of buying to come in that area to end our correction (should it be that) or our wave 1 (should primary wave 3 have started).

The short term count down can be counted a couple of different ways depending on how you count the end of the previous wave. I lean slightly towards the wave 2/b flat pattern, but I wouldn't be surprised either way. The short line for this week is follow through so that we have another couple of red candles before March opex week.

Divergence is building...

2011-02-16T22:09:00.000-08:00

We got the test of the trendline just like I was forecasting. The bulls were there to buy it up, so we had no break.

And now the market is gearing up for a big move: up or down. The RSI divergence is pointing down, but will the buyers come out in droves and cause a short covering rally? That is where we are and tomorrow should prove out.

Morning update...

2011-02-15T06:26:00.000-08:00

Prices are in retreat once again this morning. The 1325 level in the futures is a key level to watch. A move below that could provide some selling that this market has not been inclined to do. Still watching....

Count update

2011-02-10T06:26:00.000-08:00

So we got some kind of correction off of my top labeling. So far nothing of significant size. The top label is either the end of our pattern or it was the end of subminuette 3. If that is the case, then we should see some more bouncing around but buyers should keep price above 1310. We're getting very close to that number in the futures, so it should be interesting to see.

A bearish count would see yesterday's price movement the end of a wave 2 irregular flat. Today's gap down will be an acceleration wave 3. Keep that in mind as price action unfolds.

Quick update

2011-02-08T08:39:00.001-08:00

Sorry for not providing more timely updates, but the market hasn't been giving us much to work with. We're nearing a potential 5 wave pattern, so I thought I would at least give you a heads up. This last wave has been one that doesn't want to end!

Still looking for a close 1310 for an early signal that this wave is finally over. But we'll need to see something more impressive than one day of selling.

EW Count Update

2011-02-02T07:24:00.000-08:00

Well, as my primary count obviously didn't prove out at the impulsive move on Friday was wiped out yesterday, I move to my next preferred count: wave 4 flat. Looking at the lowest level charts, I expect this final wave to finish in the 1310 area. We won't have full confirmation of the next move down until we break Friday's low, but a move below the 1290 at this point should tip us off.

Best of luck!

Weekend Update

2011-01-30T21:57:00.000-08:00

The correction (minor 2) / or impulsive (primary wave 3) has begun. After going through my counts, it looked like I gave too much to my minute wave 4 with a truncation. But with Friday's sell off, the updated count looks perfect: alternating waves, and good wave 2/4 ratios.

The big question, of course, is this the start of minor wave 2 or the beginning of Primary wave 3. You all know where I lean, but I'm willing to take it one day at a time. If this is minor wave 2, then we should see the buyers come in hard in the 1175/1220 zone. My target for minuette wave 1/a is 1260.

Best of luck!

What a mess...

2011-01-27T22:38:00.001-08:00

I haven't put any updates in since the weekend because right now the wave count is so messy that I'm left with too many options. So, this is the time to take a step back and wait for the market to give us some better options. Since my wave count on the weekend update has been invalidated, that leaves me with a 5th wave extension. However, the price action has been a choppy upward grind...possibly ending diagonal? May the market show the way...

Weekend Update

2011-01-23T20:03:00.001-08:00

After a review of the charts, we are still at the beginning of the next wave down. As I have said, we don't know if it is minor wave 2 or the start of primary wave 3. Both are on the table. Those of you who have followed my blog know that I'm still a believer in primary wave 3. An economy that is still built on gov't bailouts is no economy ready for a new bull market. I believe history is on my side, but in the end the charts are all that matter. So, I will be objective in my charting as price action unfolds pieces to this puzzle and eliminates different wave counts.

As we are starting the potential for a wave 3/c tomorrow morning, I always like to see those start out with an acceleration gap. Let's see where it takes us.

Update on my trading system:
I started trading it with real money at the beginning of January. I've found some code errors and have made some slight modifications. The official trade log, however, shows 3 trades: 2 losers and 1 winner for a net loss of $76.90. Not too much to get excited about, but I'll keep you up to date on how it goes.

So far a nice start...

2011-01-21T06:40:00.000-08:00

The correction (for now) started right on schedule. The first move down that ended at yesterday's low appears impulsive. We are opening today at what should be the top of a wave 2/b. How it unfolds from here will be important in forecasting the rest of the year.

Important juncture ahead...tomorrow?

2011-01-18T22:24:00.001-08:00

We're coming to the end of the rope for the current move up. We should see a correction or an impulsive wave soon (the RSI points to tomorrow). This should prove out if this is a new bull market or the return of the bear. Key support comes in at 1175. Should get interesting....

New count needed...

2011-01-12T05:52:00.001-08:00

Well, my preferred count went out the window yesterday and is being trampled on this morning with opening pop. That caused me to go back to the daily chart and see where I missed my subdivisions. It appears I counted to quickly my minuette waves, so with that said I have put the waves at the level that now fits well with the daily chart. To sum it up, today's open will be subminuette wave 3 of minuette wave 5. My final target for minuette wave 5 is SPX 1288.

Quick update

2011-01-10T06:26:00.000-08:00

Sorry folks another crazy week...

Here's a quick update though from my last post. I was looking for one more high, and all we got was a failed test and a nice reversal. I'm counting the move so far a 1-2. Any buying off of today's gap down should be reversed by mid day for this count to be valid. Let's see if the bears are up for the challenge...

One more high?

2011-01-06T22:04:00.000-08:00

I've been quiet lately as the market has chopped back and forth. I continue to work on my automated program and have it going with real money now. I'll post my first month's results at the end of the month. I'm starting small with 1 contract to see how it fares, but I think it will be a keeper.

Wow, the bulls are really pushing and extending...Today's initial selloff looked like it might have some strength behind it, but there appeared to be an unlimited supply of buyers at today's low. Tomorrow is the unemployment report, and the reaction will be pre-market open.

Here's my forecast:

- if we're going down, then we will open below today's low. This should be sold.
- if we're going to go to one more high, then a move should be good to the 1278 / 1280 area. I'll be looking to short any weakness at this level.

Best of luck!

Major wave completion any day...

2011-01-02T20:26:00.000-08:00

The price action over the holiday weeks was low and choppy. However, the long-term picture is clear to one point: we are at the top of either minor wave 1 (if this is a new bull market) or primary wave 2 (if we are not). Certainly the price pattern that evolves from the coming sell off will tell us: with the higher level trend or against it.

The attached charts show all that we need to know: we are in the final stages of a 5th wave. It comes up on the weekly charts, daily charts and the hourly charts. The volatility charts support a top equivalent to 2007. We shall soon see...

Holiday Cheer....

2010-12-27T22:22:00.001-08:00

...I hope everyone has had some this special time of year. Even if you're not a Christian it is a special time of year to think of others and spread some cheer.

I've been pretty quiet this past week, but so has the market. Today put in a nice subminuette wave 4, and I expect our 5th wave to top out some time this week. Look for a move below the 55 hourly SMA to confirm it.

Quick update

2010-12-21T21:55:00.000-08:00

Sorry for the lack of posts. My previous post should tell you where I'm at on this: 5th wave extention. The market bias for a year-end rally has kicked in and we have our next 5th wave target right over head. This should be an ED 5th, but we'll see how it plays out.

Confirmation is a break below our subminuette wave 2.

Best of luck!

Correction started...but how far?

2010-12-17T07:05:00.000-08:00

We had a confirmed completed wave 5 pattern on Wed. Yesterday gave us a rally back to the 786 retracement, and it looks like the market is rolling over from here. We need a complete bar below the 8 SMA to confirm.

Now, this doesn't mean the bears are in control...yet. If the bulls can hold the 1220 area, then they are in a great position to really push this market higher. If the market drops to the 1200, then the bulls are hanging on a cliff with the bears ready to snap their fingers. A close below 1170, and we should have a more prolonged down move if not the return of the bear.

Best of luck!

Quick update

2010-12-15T07:23:00.000-08:00

Sorry, busy times....

The run down is this. We got our first full hourly bar below the 8 SMA, and we hit our first wave 5 target and tested it. I'm expecting, at a minimum, a move to the 1220 zone. If this gets bigger, and moves to 1200, then this should be the last stand for the bulls. Otherwise, we're looking at a much larger correction if not the return of the bear.

Resistance up ahead

2010-12-13T06:21:00.001-08:00

With the strong showing last week, the RSI(5) being in sell off territory and our wave 5 target directly overhead, I'm expecting a strong selling reaction to that level this morning. But until price gets below 1220, we can have a subdivision, so that is the 1st level that needs to fall for the bears.

Other than that, let's see where the market takes us.

Morning update...

2010-12-10T05:56:00.000-08:00

Sorry for no post last night...busy times...

There are 3 wave 5 targets. The first one is obtainable without a 5th wave subdivision. The others are not. Due to the gap up this morning, the RSI resistance line will likely be broken unless we get another sell off at the opening bell. So where do I start on a subdivision? The hourly 8 SMA. A full bar under that, means we've reached the end of a wave structure. Any short can use the high of that structure as a stop. I would not short except on a pullback once prices move that far.

Still grinding up...

2010-12-08T21:40:00.001-08:00

The move off the highs doesn't look impulsive. In addition, it is the same length as our minuette wave 2 and tested nicely our 34 SMA. That makes it the most likely candidate for a minuette wave 4. This means we should see one more test of the highs before we complete our 5 waves. The overnight futures appear to be supporting this count. Be prepared for a potential gap up accompanied by a reversal.

5th wave complete??

2010-12-07T21:30:00.001-08:00

So far we got the reaction we would expect at the completion of a 5th wave. While it popped higher out of the gate, it died right in my target zone of spx 1234 (the high was 1235.22), which was based on a 5:1*.786 relationship. Of course to get really excited we'll need an impulsive move down that takes out some key pivots.

Ideally, we start tomorrow with a gap down that runs. Regardless, as long as prices don't move above 1233 tomorrow, bears should be able to take this to the next key buy zone.

Here are the key zones to watch:
- 1220/1224 (the breakout of consolidation pivot)
- 1198/1202 (the middle of the last consolidation)
- 1172/1176 (the bottom of the consolidation range)

If the middle pivot falls, then the bulls likely face a very steep retracement (assuming primary wave 3 hasn't begun).

A small subdivision??

2010-12-06T22:08:00.001-08:00

We'll we got our sell signal, but the market didn't want to follow through. From the looks of the divergence and the waves, another small 4th wave does fit into the pattern, so I'll go with that. The only other option is a larger subdivision, which means another nasty breakout is coming...

Weekend Update

2010-12-05T22:20:00.000-08:00

We have a potential 5 wave completion pattern with Friday's price action. The RSI(5) is in a vulnerable position, so if Monday morning's price action pushes it back below 70, then that would be a confirmation that we've completed a wave structure. Now if it is just a bullish wave 1, then we'll see price hold in the 1200 zone. Much more than that and the bears will come hungry and should get their fill with prices breaking down to the 1120 area. This would be the next bullish support area. If prices move below 1100 then look out.

My Automated System

On an unrelated note, I've been working on a fully automated system for many months now. I just finished it at the end of November and back tested it from 5/15 - 11/22. Because of the changes in the futures contract, it made it difficult to get good data before then. I'm excited with the results as you can see, but I know it is only 50 trades, and that is not enough to get solid statistics on it. I'm testing it in a simulated account through the end of the year before I put real money into it.

Here's what it has done since. It seems to average 7 trades a month. Hopefully it is even half as good as those back test results...

Bulls keep it pushing...

2010-12-02T23:19:00.001-08:00

...to the area they need to. The wave pattern is setting up that wave 5 should not subdivide. With that said, we are currently in subminuette wave 3. Once this wave is over, I would expect a consolidation wave 4 and a pop and drop wave 5. This will complete a minor wave. It will either be wave 1 of primary wave 3 (if this is a bull market) or wave C of primary wave 2 (if this is a bear market). You know how I lean, but the market should make things clear enough for us.

Bulls need to keep pushing...

2010-12-01T22:32:00.000-08:00

...if they want this move to stick. Any drop below the 34 SMA at this point will likely keep minute wave 4 in play: either a triangle or complex zigzag. If, however, the bulls can keep the pressure on until we get to the 1220 zone, then we will have a confirmed minute wave 5. Targets for this wave are:

1. 1247
2. 1265
3. 1290

Be aware that if we reach any of those targets on this first impulsive wave, then we may have a fully complete 5 minute waves and will be ready for either another minor wave correction or the return of the bear.

Breakout is coming...

2010-11-30T22:32:00.001-08:00

...but will it be up or down. Price continues to be within the down channel, so my bias is still for a test of the 1150 area. Should we open above 1190 then bulls should run it up and our wave 4 should be over. We open near today's lows and that should be good enough to send the bulls over the edge.

Is wave 4 complete?

2010-11-29T23:06:00.000-08:00

The charts say maybe as we got a nice rally today off of our 1170 support area. It would be something like an a-b-c-x-a-b-c with the 2nd abc being a flat pattern. Definitely doable and a bit of a mixup. But until we take out the 1210 area, we may still be in for some more consolidation or a test of 1150. Let's see what the market has tomorrow.

Long weekend update...

2010-11-28T21:48:00.000-08:00

...I hope everyone enjoyed a nice happy thanksgiving. I'm still trying to recover from a game of football on Thursday and paintball on Friday. I'm not as young as I used to be and my body is reminding me now more than ever.

The short-term trend is still down, and I'm expecting a test of the 1150 area this week. This will determine if we're in a wave 4 or the start of something nastier for the bulls. Should we take out last week's high tomorrow, then I'll be looking for one of my original wave 4 scenarios: a flat or a triangle.

Best of luck!

Not a good opening for the bulls...

2010-11-23T06:04:00.000-08:00

It appears the wave 4 I've been charting is still on schedule. However, the triangle/flat I was looking for doesn't look like it will come. In addition, a zigzag here is dangerous for the bulls because (a) we weren't expecting one (b) we will be close to an overlap on wave 1 and (c) it could easily morph into an impulsive pattern if it extends below 1150.

I'd be surprised if the bulls didn't make some attempt to close the opening gap. This is the chance to exit longs and get short.

Lots of downside risk in the current range

2010-11-21T22:46:00.000-08:00

Friday's move down stopped right where it should have and reversed. That makes this current move impulsive, but should we get long??

Here are the different count possibilities:

- In Wave 4, looking for a flat or a triangle
- In Wave 5, looking for a test of the previous high

The best long trade right now would be for this small wave up to retrace some tomorrow (1185 zone) and put in a bullish reversal bar. This would be good for another run at the top.

The best short trade right now would be to short the previous high and run it back down to 1170 area.

Otherwise be patient.

Quick update

2010-11-19T06:43:00.001-08:00

Yesterday certainly counts as a solid test of the 34 SMA. So much so, that we may have already put in the low. This morning we're getting weakness. Is it the continuation of our pattern and a wave C, or is it just a minuette or smaller degree wave 4. If it is a wave 4, price should stay above 1187.

So far looking corrective...

2010-11-18T06:00:00.000-08:00

The move into 1170 support was unable to really breakout in an impulsive wave. So either we have a long series of 1-2 subdividing waves (unlikely) or we are setting up a minute wave 4. Now, wave 2 was 90 points. We've only traveled about 55 points so far. Wave 2 was a zigzag wave, so using the rule of alternation I would expect either a flat (unlikely), a triangle (very likely), or a complex (i.e. zigzag - x - flat) wave (likely). The market can extend this wave 4 as low as 1150 and still be in the game (no wave 1 overlap). We should be testing the 34 SMA this morning. Let's see how it goes.

We're in the critical zone

2010-11-16T22:28:00.000-08:00

Sorry for the lack of postings. Work and kids' sports are keeping me very booked (my son just made the freshman BB team, yeah!). But here is a quick update.

Prices tried to rally yesterday, but the market was unable to get a full test of the 34 SMA. As a result, the market gapped down below a key area (previous breakout pivot high) this morning and kept on going. The market has yet to have a finished impulsive wave, so either this isn't done yet or we're in the finishing touches of a corrective wave (wave 4).

I'm looking to cover my short positions on any of the following events:
- a test of the 34 SMA, then I'll get out on the next test of the previous low pivot
- significance divergence showing up on the hourly chart
- hitting my 1150 target

Go Bears!

The next down wave

2010-11-14T22:28:00.000-08:00

We all know the talk that is going on everywhere about us being in a new bull market or primary wave 2. This next down wave is important for solidifying the bull or the bear. Our move down so far has stayed within our 25 pt symmetry (2 of them). So, the bears have yet to prove themselves by breaking down. Should we rally tomorrow expect selling to come in at the 34 SMA (60 min). This would most likely count as a subminuette wave b. Our wave c should close out in the 1170 area, which would never give us a confirmed weekly reversal.

If price continues to break down before testing the hourly 34 SMA, then we will be looking much more impulsive to the downside.

Busy times...

2010-11-12T06:34:00.001-08:00

...Sorry for the lack of attention here. I've been busy working on an automated program, my regular job, and helping to manage these 8 kids!

But, I've still been watching the charts, and here is what I have:

- Bears need a weekly reversal: soon! This comes in at a move to 1165.
- Volatility continues to bottom, which is bad for the bulls.
- A reversal of the USD in the face of QE2 would kill this market
- Key levels were breached overnight - I expect a retest of those levels today
- A test of those levels would breach my 1202 line in the sand showing this wave structure to be completed.

Take it easy and enjoy the weekend!

So far a nice start...

2010-11-10T06:31:00.000-08:00

...to what could be something big. If we can get to 1202 before crossing the hourly 8 SMA, then I'll be more excited about this moving into something more.

Looking for more than 25...

2010-11-08T21:46:00.001-08:00

25 appears to be the magic number. The magic number of what you may ask? Since Aug 27th, there have been 5 pullbacks. Guess how many points...that's right 25. My point is that these pullbacks have all been part of the same wave structure. Once we pullback more than that, we'll know that this wave structure is finally over. Right now, the support level is 1202.

Still looking bullish, but next pullback is key

2010-11-07T22:25:00.000-08:00

So, if you are on board with the Fed and believe that they can magically wave their wands and all the trillions of bad mortgage loans will no longer have any impact on the economy, that we have entered the next bull market, that earnings will only get better from here, then you'll be wanting to get long in a bad way.

Okay, assuming you are correct, then I would wait for the next pullback, because right now we are in a spot on the weekly charts that have historically marked good sized pullbacks. The difference, of course, comes from being in a bull market or a bear market. Being with the overall trend is critical in what happens next.

You see, when you are with the trend, the market gives you lots of divergence before the next temporary reversal. Being against the trend, however, leaves you with little warning before the market suddenly reverses. Don't believe me, just try and capture the tail of any of the last corrections since the March 2009 low. The drops have been reversed quickly before any divergence could ever set in.

So, if we ARE in a BULL market, then the next drop will be shallow as the market will setup solid divergence over several weeks, and likely even through the end of the year. In other words, look for more consolidation as the next drop instead of a scary drop of the cliff for weeks kind of move.

However, if we ARE in a BEAR market, we are in the last stages of primary wave 2, and the market will reverse soon with no divergence warning coming on the weekly chart. The next move down will be furious. Let us see what clues the market gives us this next week.

One thing to keep in mind: when the market historically topped in October 2007 it was on a grinding retest of the July top. Deja vu?

QE2...

2010-11-03T21:27:00.000-07:00

Looks like it wasn't the elections but Bernanke's QE2 program that got the market to move a bit. It looks like we're still in the range for an ED to end tomorrow or Friday around the 1200 mark. If it moves past the 1208 mark, then this some other crazy non-countable pattern.

Hang in there...

Elections tomorrow, and then a breakout

2010-11-01T21:42:00.000-07:00

This back and forth is really getting old. No new counts without a significant move; however the move down (so far) certainly isn't anything too exciting. As long as America takes out the trash tomorrow, I'll be content.

One more wave to go...

2010-11-01T06:42:00.000-07:00

Well, apparently our potential breakdown last week never materialized. You can see from the hourly chart there have been a ton of subdivided waves in the current wave structure, and that is on an hourly chart!

With the # of waves and the choppiness of the market, I moved some numbers, so that the ED has one more high to make. With the election tomorrow, I guess it makes sense. Based on price action, the market will sell off after the election, but will be temporary (wave 2) or longer term (primary wave 3). I guess we'll know in a couple of weeks.

First wave complete...

2010-10-27T19:38:00.000-07:00

Price action today put in what appears to be a completed 5 wave pattern. Whether it is wave 1 of a larger bearish impulse wave or wave a of a larger bullish corrective wave, we have yet to know. I've mapped out a couple of price patterns that I'll be watching for over the next couple of days.

Best of luck!

Stay on target...

2010-10-26T22:52:00.000-07:00

...nothing new to report, yet. Let's see where we go tomorrow.

Stay on target...

2010-10-25T22:48:00.001-07:00

Well, the market did make one more new high (as was allowed) and has now exhausted the ED scenario with this extended count.

The bullish scenario is that we have just finished wave minuette wave 1. Expect a minuette wave 2 to test the 1100 area.

The bearish scenario is that we had a failed 5th / C wave, and are about to have the first impulsive move of Primary wave 3.

Let's just say that the price patterns from these two scenarios should be easily recognized. Time to call your hand Ms. Market...

Not much to say...

2010-10-24T17:50:00.001-07:00

So here I am reviewing the charts for the week and there is really little to say. The market has been in a slight upwards sideways action now for 8 days. Volatility is bottoming. New highs is diverging from price action, and volume is increasing on the down days. Now, we may have a new high before this next down wave begins as shown on my charts, but it is not necessary.

We should see a test of 1150 this week. If this is a bullish move, that could be it. However, there is a much larger support area at 1100 where the bulls would be able to stage a major rally from.

The bears need to get price below 1100 to take control of the charts once again.

Still topping...

2010-10-21T22:20:00.000-07:00

Well, our test of the 89 SMA and the symmetrical a-b-c turned out enough to eek out a new high. But the market is still caught in the topping pattern I mentioned before. The REAL test of the market will be how it handles the next decent sell off. Until, then it is struggling upstream with what appears a never ending line of sellers above 1180.

So far so good...

2010-10-19T21:34:00.000-07:00

The market confirmed our completed 5 waves this morning with a great gap down at the open. Our wedge trendline was backtested in the early hours, and then the sellers kicked in. We got a nice little bounce off the 89 SMA, which may provide for a sideways day tomorrow. I'm looking for a test of the 1150 zone tomorrow or Thursday. If there is good divergence on the hourly chart, we may get another bounce. So far, we are still in one wave down structure on the hourly chart, so I'm not going to start labeling until we have some data to work with. Strictly speaking, the 15 min chart is showing a nice A-B-C corrective wave right now. Regardless, this structure would likely be the front wave of a larger 3-3-5 corrective wave. Let's see how it unfolds...

5 waves complete

2010-10-18T21:22:00.001-07:00

The back and forth of three waves continue to keep me looking for an ED. With a new high today, we have the setup for a 5th wave. Investor's reaction to Apple's earnings could be the catalyst we need to get some real selling going. The market will show us tomorrow. I continue to look for a test of 1150. I'll be closely watching how the pattern looks going into that price support. If it is a 5 wave, that means we should be able to at least get a test of 1100. If not, then we'll watch the bounce.

Best of luck!

Weekend Update

2010-10-17T22:03:00.000-07:00

Not much more to say except that the bull case keeps on dwindling with a growing divergence between the market and the Nasdaq. If Apple's earnings disappoints for the first time in a long while....

The S&P chart is screaming pullback. With tests of the 34 SMA coming 3x in the last week. When an SMA gets tested so often is such a short period of time it generally bodes well for a reversal. With the RSI(5) in overbought territory on the daily chart, this should be a good opportunity to move the charts lower tomorrow in an attempt to test the 1150 area. I would expect much more, but we'll start there.

Tomorrow we grade the test

2010-10-14T23:23:00.001-07:00

Well the bulls had a perfect setup and couldn't hold it. The bears took price down to the key area of support: 34 SMA and rising trendline. A nice bounce, so far, has come off that area. Google announced great news after the close. Simply put, the news is upbeat, the charts need a strong up move, so if it doesn't come tomorrow, then sellers will pile in and take the ship down. When a market doesn't move the way you would think, it is because it is getting ready to move violently in the opposite direction. Tomorrow is options expiration, so it will be interesting to watch what the market players do. There have been plenty of times in the past where they have sold the market hard. Which will it be tomorrow?

Looks bullish until proven otherwise...

2010-10-14T06:27:00.000-07:00

With a market that just won't stop and the NDX testing our previously labeled primary wave 2 highs, it appears that primary wave 2 is not over. However, this is a dicey place to be getting long since a failure here should be significant with one index hitting a new high and the others not confirming that high. We would essentially have a failed 5th wave and the maximum of our ED from yesterday would be in play.

Take Care.

Rich

Today is it for the bears

2010-10-13T05:51:00.001-07:00

Here is my quick update. Today is the last day for the ED scenario to work for the bears. Based on market symmetry and resistance levels, price should be held in the 1177 - 1180 range. If it does not, then primary wave 2 never likely ended.

Stick to your rules!

Which way, which way...

2010-10-11T21:25:00.000-07:00

With the light volume of Columbus day came another doji candle. Tomorrow marks what I am counting as Minor wave 2 being 1.5x the length of minor wave 1. One thing is for certain, if this is a 3rd wave for a bull market, price action is taking its sweet time. We still sit below the dreaded 786 retracement at 1174. We could still be in our final a-b-c of the 5th wave of an ED having finished the 'a' wave today and the 'b' wave tomorrow. The wave structure won't be over until price can get below these key levels:

- 1150 (the micro 4th wave low & the hourly 89 SMA, which has provided support since the 1040 low)
- 1130 (the breakout pivot)
- 1100 (the daily 89 SMA and another key daily pivot)
- 1040 (the last key support - tested 3x)

However, if price can get below the breakout pivot, then odds are VERY high that the rest will follow with the start of Minor wave 3.

Weekend Update

2010-10-10T22:15:00.001-07:00

Last week, the market thwarted several attempts to get anything going on the downside. At the end of the week, price left us on the edge of a potential bear channel ready to break out. Through all of this though, the market has been making several 3 patterns, which led me to attempt different triangle patterns. I first mentioned a potential ED pattern, although it didn't quite look right. Then I mentioned a wave 4 triangle, but the reversal pattern did play out right.

Where does that leave me now? I'm back to another ED count with the 786 retracement and a potential overthrow of the channel coming in to play tomorrow. In addition, we have a time relationship coming in on Tuesday where minor wave 2 = minor wave 1 * 1.5. This is the last of the minor wave 2 bear counts we've been tracking. If the bulls close this above 1175, then primary wave 2 is VERY likely not over. So this is a very critical juncture.

Best of luck!

Looks like jobs will do it...

2010-10-07T23:14:00.000-07:00

Well, in the end the market does what it is going to do...Today it made a brief high at the open giving us a potential 5 wave setup and erasing my failed 5th wave theory yesterday. Tomorrow morning is the jobs report, and it appears as though the market players are waiting for the market to give them a clue before they make their move. So we'll wait and see what goes on. I like the follow through potential of a gap down move. I'd wait to see if a gap up move has legs. I would definitely not short the open until I see the sellers overwhelming the bulls.

Best of luck!

Nothing convincing yet...

2010-10-06T19:49:00.001-07:00

Price got rejected at the high again today, so where does that leave us. Here's the 15 min chart, and I want to zoom in to this orange box and look at the 5 min chart up close.

If you've been following me for some time you know I'm a big believer in market symmetry. Here is what the market is telling me with this move off the latest attempt at a new high.

Our wave 4 should have a fib relationship with wave 2. Generally this is 1:1 or 1:1.382. You'll notice that buyers came in when the market corrected to each of these levels. However, in both cases, buying dried up BEFORE making a new high. Price was then able to move down even further than both of these levels now making our wave 4 / wave 2 relationship out of whack. This is telling me that somewhere in this mix is VERY likely a failed 5th wave.

Now EW tells us that failed 5th waves result in swift price moves in the opposite direction. So, if this is the correct interpretation, we should see consistent selling the rest of the week. 1130 should come up soon and eventually the 1095/1100 level that I've been watching so closely.

Let us see...

Completed pattern?

2010-10-06T06:28:00.000-07:00

Well, my call for an 'x' wave was right on as the market rocketed off of that low with a gap yesterday. However, the bulls aren't out of the woods yet. From a time perspective they are still within the minor wave 1 * 1.382 time sequence (currently at +1 days) and the a = c zig zag potential minor wave 2. This isn't a time to get overly bearish, but a solid move below 1150 would definitely get me interested.

Cautiously bearish...

2010-10-04T22:18:00.000-07:00

Today's price action dropped us bears right in the middle of a potentially bullish setup. Corrective patterns have a tendency to repeat themselves during a prolonged impulsive move. When I marked subminuette wave 2, it was with a 22 pt pullback. Wave 4 also was a 22 pt pullback. And today's low marked yet another 22 pt pullback. In addition, it did it within 7 pts of a 786 retracement. One more failed attempt at the 1129 area would provide the market with the divergence it needs to get a strong bullish rally going.

So, the bears need to push through this area tomorrow and the next day. Only then will we get to our real test area of 1095/1100.

Sunday night...

2010-10-03T22:05:00.000-07:00

Friday's price action just looked like a subdivided wave 2. Maybe some end of week price painting. I'm still holding short with a stop at 1159 and a short term target of 1100. Other than that, nothing new to report.

Major Top?

2010-10-01T06:31:00.000-07:00

Ok, I've only put up a couple of daily charts here, because we have in the making (finally) the top of minor wave 2 yesterday.

Confirmation will come with a daily close below the daily 89 SMA. Significant support is comes in at 1095/1100, which will likely be where this SMA is at the time price gets to this level. I would anticipate that would be a minuette wave 1.

Now, this chart I've used in the past to identify times when the market is going to accelerate to the downside. It has given us a couple of false signals over the last few months. Yesterday, it gave us another signal. I believe the take away from this is that the false signals came after steep corrections.

Look for some strength this morning as we work on a subminuette wave 2.

Best of luck!

One more high?

2010-09-29T20:59:00.000-07:00

Today's price action just bumped along up and down. I redrew yesterday's support line with the maximum allowed room (low-to-low instead of close-to-close) and that shows us that we don't have a breakdown as of yet.

Price Action looks like it wants to try and get up over 1150 at least one more time. A failed move should give us the trigger we've been waiting for. A solid breakout gives the market that extended 5th wave I've mentioned.

Where to from here...

2010-09-28T22:35:00.000-07:00

Price action didn't cooperate today after we got some morning weakness. That puts us in a couple different scenarios:

- We are in some kind of ED, and we will get confirmation with a close below today's low.

- We are in an extended 5th wave, and tomorrow we should bust out of the wedge and head towards our price targets.

No reason to get aggressively short here, but I would hold what I have unless we close above 1160.

Daily chart shows 5th wave

2010-09-27T22:57:00.001-07:00

Sorry for leaving everyone hanging this weekend. It was a crazy one here, and I never caught up. I did have a few minutes to look at the charts and the daily is flashing a big time 5th wave at today's high. Going from the dailies down to the hourly chart and making some modifications, I now have our subminuette wave 4 ending last week. Do we go to a wave 2/B down now or are we going to start minute wave 3? Price action will let us know for sure.

Target for a wave 2/B down is 1096 area and a daily RSI(5) between 30-40. Target for a minuette wave 1 (assuming minor wave 3) is in the 1000/1020 area with a daily RSI(5) showing divergence with a low in the 20s.

Let the market lead the way - but I sure would like to see minor wave 3!

Downward pressure continues...

2010-09-23T23:20:00.000-07:00

Sorry for no post yesterday...still swamped with work...

We continue to see selling pressure, and it was interesting to see the market bounce right off the lip of my buy zone. I don't see any divergence on the hourly chart, and the daily chart RSI is sitting right in the middle. We've retraced a mere 23.6%. If this is market is strong, then we may not see much more downside action. But the way it closed gives me a feeling that we could get another gap down tomorrow but see a solid down day.

Let's keep watching...

5 waves complete

2010-09-22T05:45:00.001-07:00

Yesterday's price action appears to have given us the wave 4 I was looking for (official move was almost 9pts), a quick retest 5th wave and another reversal. I'm expecting follow through selling at least to the 1106 / 1122 area in what would be the next buy zone. If, however, price can get below that zone, then there should be a strong move to 1090 as that would be the next key area of support. It's not until price gets below 1090 that the momentum shifts once again from up to down, and we have a good shot at minor wave 3 having started.

Best of luck!

Getting very close...

2010-09-21T06:53:00.000-07:00

to a confirmation short signal. From the price action yesterday, it appears we have a 5th wave extention. I'm expecting another small 4th wave (in the neighborhood of 7-10pt) before things really get moving. We did have a nice volatility move yesterday, which is actually getting us setup for the bearish move.

We have massive overhead resistance in the 1157/1164 range. I'm not sure we get there, but if we do, then get ready to short.

After options expiration Friday...

2010-09-19T22:41:00.001-07:00

Well, going strictly by the charts, we appeared to have a triangle of some sorts on Friday as the market makers pinned the charts where they wanted them to be. If we break lower Monday, then my scenarios go like this:

Primary: We had some kind of complex subminuette wave 4 and price finds support in the 1105 / 1115 area. This would give us a 15-25 pt correction, test our hourly 34 and set us up for a wave 5.

Secondary: The choppy action of last week was it and we should go down to the 1090 / 1095 area. Anything more than that though, and we are looking at our more enticing bearish scenario.

If we break higher on Monday, then we had our wave 4 and any reversal of a test of the new highs is VERY shortable.

5 waves complete

2010-09-17T06:33:00.001-07:00

While we never really got a solid test of the 34 SMA, we did work our way to an oversold condition near the 34 SMA, so that qualifies as a wave 4. Pretty wimpy I know. Look for today's action to put in the top and sell off some and really get started next week.

Wave 3 extended

2010-09-15T22:49:00.000-07:00

Well, what looked like a good setup for wave 4 never materialized as we never tested the 34 SMA. Instead, I'm labeling as a subdivided wave 4 flat. I'm looking for another test of the high tomorrow for our wave 3 and then a 20-25 pt wave 4.

Morning update...

2010-09-15T06:37:00.000-07:00

Another late night...

Okay, based on price action and where we are with the moving averages, I've ditched the subminuette wave 4 and went with an extended 5th wave of subminuette wave 3. That puts us now in subminuette wave 4 with a price target in the 1100/1108 range based on the size of our wave 2. I'm looking for price to solidly test the hourly 34 SMA during our wave 4 (even break it a little). We should then have significant divergence in a wave 5 to finish off our minor wave 2 flat.

Best of luck!

Morning Update...

2010-09-14T05:45:00.000-07:00

Another late night and here I am. The ED scenario was a bust at the open. We have a high potential of a 5 wave completed pattern. There are a number of different scenarios, so here they are:

#1 5 waves completed at the open yesterday. We had a wave a/1 down and a wave b/2 retracement. Today we will get our wave c/3. If this is the count, then we could have an irregular flat minor wave 2 on our hands, or a bullish minute wave 1. The selloff will tell us which it is. If we are in a minute wave 2, I would expect price to hold the 1096/1100 area.

#2 We are in a 5th wave extention. Any weakness this morning should hold at yesterday's low and reverse to move to the 1128 area.

Morning Update...

2010-09-13T06:13:00.000-07:00

Sorry about the early post. My computer caught some kind of virus and incapacitated my main browser (chrome) and IE. Fortunately I have firefox installed too, and that seems to be working, but it cost me my time trying to fix the others.

Here's what I have. We haven't had any solid bearish reversals that have amounted to anything. Volume continues to be light. The market broke out of the trendline channel formed with the previous high/lows last week. We have what could be an ending diagonal forming. We will have a gap up at the open. With that said, here are my scenarios:

1: ED. Price will reverse at the open (potentially a drop and a retest). Key indicators: the opening gap closes and we close below 1105. We should see significant follow through to the downside the rest of the week.

2: 5th wave extention. Price will likely try and close the opening gap but will fail. We should close above 1128 today or tomorrow.

Bullish still....

2010-09-09T22:07:00.000-07:00

We got our wave 3 peak (currently labeled) right at the 786 retracement from the last high. The move off the high was nothing to write home about (as of yet) and as long as any downside action can be contained in the 1091 area, we should have a 5th wave up to test the previously labeled minor wave 2 high.

Best of luck!

At the open...

2010-09-09T06:25:00.000-07:00

...sorry for the non-post last night. Another full day and didn't have much in me to review the charts. This will be quick...

The futures are going to have the market jump the trend line that has been providing resistance at the open. Because the retracement yesterday didn't do much, I'm changing my count to have subminuette wave 3 still in progress. That makes micro waves 2&4 have a 1:1.382 relationship. I'm still looking for a 20-25 pt subminuette wave 4 triangle. If the next move down were to take us below Tuesday's low, then that would be bearish.

Cautiously bearish...

2010-09-07T21:54:00.001-07:00

Price was rejected at the trendline as predicted. So far the market has sold off 14 pts on the SPX and 17 pts on the futures. We are nearing the 20-25 pt wave 4 correction zone I mentioned yesterday. There is lots of setup here for the market to just drop, so I'm keeping my stops tights (1 pt over the hourly 8 SMA). If we're going to run, I'd like to see a 30-40 pt down move either tomorrow or Thursday. If we hold the 1080/1085 zone, then I'll be closing my shorts and possibly dance lightly with the bulls. Let the market lead the way.

Still bullish for now...

2010-09-06T22:09:00.001-07:00

Wow, last week had an incredible bid under the market the whole week. We're now overbought and at a key trendline with a wave pattern that appears complete at one level. Based on the size of our subminuette wave 2, I'm looking for a 20-25 pt wave 4 correction (quite possibly a triangle). If the bulls give back much more than that, then we have a nice exhaustive wave C, and the bears will take over fiercely next week.

Key test coming...

2010-09-02T22:01:00.000-07:00

Sorry I don't have a whole lot to say. It's been a couple of long work days, so I don't have much time for deep analysis. What is coming up is a key test of the trend at 1096/1106. We'll definitely get a pull back before or after the 1st test, but if the move down is weak, then the bulls will move and confirm a change in trend from down to up. Watch any pullbacks to hold in the 34 SMA (hourly) for the bulls. A loss of ground here should put the bears back in the drivers seat, and a quick move down to 950.

Charts are turning bullish...

2010-09-01T22:32:00.001-07:00

Well, the sellers ran out of steam at the goal line, and the bulls took advantage in a massive up day. The charts have turned short-term bullish, but there is still more to go before we are looking at a change of trend. Anything greater than a 10pt pullback from here (before crossing 1100) should put the bulls on caution of a false breakout.

The bullish count is now my primary count. The bearish one is the last stand at 1090.

Best of luck!

How many tests will it take?!!

2010-08-31T23:21:00.000-07:00

Unbelievable...one more retests, and it appears that the line to buy at 1040 goes out and around the block, down the street, and into the next town. Today marks the 3rd test of 1040 in 5 days. Certainly the charts now have yet another reason to be bullish, but until we get a solid close above 1060, I'm holding my short position that I opened today at the open ;-(. Oh well, this has been a tough one to trade...

Tomorrow shows us the way...

2010-08-30T22:21:00.000-07:00

Wow, I was totally expecting the bulls to come in at the open and run this up. Instead, price just kind of drifted lower all day with every little rally being dumped on. We ended the day right at the 786 retracement. This leaves us with two very obvious primary counts:

1. ST/MT/LT Bearish ;-). Wave 1 of 3 subdivided as I explained in my morning post, and we have now entered wave 3 of 3. Today was a drift but tomorrow and Wednesday starts the pain, and we see the bulls crying uncle all the way to 950. Price just get a little bounce in the neighborhood of 1040, but not much more than 38.2% retracement. Then the wheels fall off the bus.

2. ST/MT Bullish. We gap up tomorrow and maybe back test, but shouldn't. Once the market gets above 1060, it should really pop as the market enters wave 3 of 1 of C.

Quick update

2010-08-30T05:49:00.001-07:00

Sorry for the lack of a weekend post, but we were swamped with soccer seeding tournaments, high school football, and a Boy Scout Court of Honor. So, here are my quick thoughts before the market opens...

The main bear count had to be shelved on Friday as the market reversed on a retest of the lows on Friday. This was the key buying area that I pointed out last week, and the buyers certainly were there in mass. The move Friday should not get much above 1070 if the bear is going to continue. Any higher, and it puts my next bear count into play, which this sell off was all part of a wave B, and we are now entering a wave C that will take out the highs 1120 highs and possibly the April highs.

We should get some kind of pull back off of the 1070 area. In fact, the futures tested the 1070 area last night have already pulled back 10pts. The bulls should be able to keep this in the 1055/1060 area for a wave 2. If not, then we may see some very intense selling.

Best of luck!

A solid backtest...

2010-08-26T21:26:00.000-07:00

I mentioned in my post last night about the importance of the 1060 level. The market respected that level and had a nice reversal back (so far) to the 786 retracement of the move off of 1040. Wave 2s are notorious backtesting waves, so I decided the chart made most sense going with a subdivision wave 1 and 2. Tomorrow would mark a 3rd of 3rd of 3rd, so it should be pretty easy to spot if this count is correct: a 30-40 pt move to the downside. Any move above 1060 should be considered bullish.

So far the knife catchers have it...

2010-08-25T21:21:00.000-07:00

Well, the buy zone I identified in last night's post was certainly bought with a fury. Will it last though is the big question. So far it was worth 15+ ES points, but will it be a homerun? The current charts are pointing to more selling beginning tomorrow. So if the market doesn't, then look out. I'll be getting bullish if the market can get a close above 1070.

As for the bear count, I have two possibilities:

(1) A subminuette wave 4 with a 5 down coming tomorrow with at least a slightly lower low
(2) We are currently in a subdivided wave 2. I actually like this count better because we have yet to experience a 30-40 pt true range day to the downside, which is what I would expect to see during this wave down. I don't see it happening in my first scenario unless wave 5 subdivides.

Continue to watch the hourly 34 SMA. If we touch it tomorrow, we should get a strong sell reaction. If we don't, then prepare to go long.

Bears still have the ball...

2010-08-24T22:36:00.001-07:00

I'd first like to note that the market gave us the signal I was looking for: a gap at or below Friday's low. After that, buyers came in strong near the 1040 pivot and the rest of the day was spent in consolidation. While the daily charts show consistent selling, we have yet to have a fully impulsive down move, where the market moves 30+ points down. We've had them in the previous waves, so if this is truly a minuette wave 3, then we should see at least one 30-40 pt move in one day (measured from the close of day 1 to the low of day 2). Tomorrow would work nicely for it. Let's see what the market gives us.

If the buyers step up here and can get a close back above 1070, then I'll move towards a short-term bullish bias.

Best of luck!

Bears push Bulls toward the edge...

2010-08-23T21:14:00.000-07:00

Price action was consistent with a wave 2 flat, so that is how I'm labeling it. Based on my primary count, I would really like to see an acceleration gap down tomorrow at or below Friday's low (1063) to get the ball rolling. For the bulls, they need to get price above the hourly 34 SMA (currently 1080). If you went short on a 5 min reversal, then you got short near the high of the day ;-).

Best of luck!

Weekend Update

2010-08-22T21:35:00.000-07:00

I decided to go ahead and post the charts at different time frames. The market has a bunch of pent up energy that should be released to the downside starting this week. It will be quite disappointing if the bears decide to not show up in mass and get their job done. We shall see.

Let's start with the 15 min chart. You have to take option expiration not too seriously as other motives are at work. With that being said, I expect either a solid move down Monday morning at the open or a bit of continuation to the upside to finish off a wave 2 flat. Either one is valid. If the market gaps down, then I'll short the open. If it gaps up, I'll short a 5 min reversal bar.

The hourly chart shows us the major line in the sand for the bears: the 34 SMA. Currently at 1083 and dropping, it should hold any upwards price action. If the bulls can get a solid breakout, then I'll have to change my short term bias to bull.

The daily chart shows divergence forming on the RSI(5). If it doesn't hold, then that will support a capitulation move on the part of the bulls. A close below Friday's low should do it.

A quick look at the weekly chart clearly shows the amount of downside potential (with major support at 955). The RSI(5) has plenty of room to run to the downside should the bulls throw in the towel.

Best of luck!

Bears are looking good...

2010-08-19T20:35:00.000-07:00

We got what we wanted: an acceleration gap. I'm looking for the next possible bounce to come in at the 1035/1040 area for a potential subdivision. Since we need to get down to 950 area for my minute wave 1 target, we should get at least one subdivision to get there. Tomorrow is options expiration, so anything can happen. It will be interesting to see if Israel decides to spice things up with Iran's nuclear facility potentially getting fueled up this weekend. It would certainly 'fit' the wave pattern.

Best of luck!

Fireworks tomorrow??

2010-08-18T18:16:00.001-07:00

Here's where we are. Price did NOT hold the key level I identified in yesterday's post. I mentioned that if price did not hold, then it had to be a subdivided wave 2; however, I should have also mentioned that it could have been a B wave. Since price did not launch to the moon in a 3rd wave, I have to side with a B wave label.

Of course, from here I had to relabel some of my prior areas like my failed 5th wave to end minor wave 2. With that change, we have a much better 5 wave move down as the wave 2 flat scenario is out. Since we have currently retraced 50% of wave 1 and have taken 61.8% of wave 1 in terms of time to do it, we have met all criteria to start wave 3 down. Our early confirmation is to take out our wave B low (1088), which looking at the futures could happen pretty easily at the open tomorrow.

Best of luck!

Bears are on the ropes...

2010-08-17T22:44:00.001-07:00

Today's price action pushed the limits of my resistance zone (earlier identified as 1088 - 1095. Price did, however, close below key resistance (1096) while being rejected (at least so far) at the 50% fib (1098) plus a couple of points. The RSI has reached a level which has been consistent with past rallies in the downtrend that took over the market in late April.

So is it 3 waves up or will it be 5? The move down the last part of the day has reached a level which equals the down move that would make up a potential wave 2. Should price hold this level tomorrow, then look for at a minimum a 5th wave (assuming no subdivisions). This would put our minor wave 2 count in jeopardy and likely the April top.

A move to 1082 should have enough selling behind it to confirm our minor wave 3 scenario.

Best of luck!

Quick update

2010-08-17T05:48:00.001-07:00

Sorry about the late post, but I spent several hours with my son in the emergency room after he hurt is ankle during football practice. The good news is that there was no visible break. We'll get the final word on a re-examination this Thursday. Oh the joy of kids...

As for the charts, my primary count is that we are in a wave 2 flat that should finish somewhere between 1088 and 1095. Much more than that, and the bulls may have taken back the charts.

Not much to say...

2010-08-15T21:54:00.000-07:00

Friday's price action didn't do much to lean the market for Monday's open. I'm looking for price to confirm the count this week even with options expiration coming up on Friday.

Key area for the Bulls: 1096. If price can get to 1102, then the Bears should be toast.

Key area for the Bears: 1060. If price can get to 1055, then the Bulls should be toast.

I'm expecting the high / low for the week to be Monday. I will, of course, be rooting for the Bears!

Bearish count continues...

2010-08-13T06:20:00.000-07:00

Sorry for the late post, things were crazy last night...

Yesterday's low was just 4pts shy of my wave 1 target. It is unclear at this point if wave 1 actually finished at yesterday's low because the retracement has been shallow; however, we have eclipsed 23.6%, which is the minimum wave 2. Should price find support today in the 1070 area and close above the hourly 8 SMA, then I'll be looking for a minuette wave 2 completion at least in the 1090 area.