Its always nice when the market rewards you with something you were expecting. It seems rare enough, but today was just that. I said watch the 850 and 870 for the clues. Once we broke 850 today, there was a little pause and then the market had its foot to the floor as we accelerated to the downside.
We ended the day right on the trendline that has kept this market from falling off the cliff. It is now being tested for the 5th time. My experience is that trendlines usually fail on the 4th test. So, I'm expecting a failure tomorrow and another selloff.
Notice the RSI(5) readings. During wave 1 of 5, we hit an extreme low of 8.49 (during its respective wave 3). During wave 1 of 3 of 5, we hit an extreme low of 11.86. This is our first clue that we have started wave 3 of 3 of 5: our current low is already 10.68. It should get lower than 8.49 before this is over. That is a lot more selling in the near future. So, how does it unfold tomorrow? Here are my two best guesses:
#1: We gap below the trendline at the open (likely rally up to it and give it a kiss good-bye). We then drop down to the 810 area where we pause some more. When we break 800 the drop to 740 will be swift.
#2: We gap up tomorrow and rally to 830 area, where we reverse and break the trendline and move down.
Either way, its likely to get very ugly tomorrow. BTW, should we somehow get above 850, then all of this is likely on hold and we will likely move above 870. I'm not saying that I think it will happen, only that it shouldn't.
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Rich, you are not expecting a 3/8 retrace to 840-ish? your 830-ish is only .23 retrace. Thanks.
ReplyDeleteThanks for the charts each day. I like that you only focus on a couple charts and are clear and concise.
ReplyDeleteSteve,
ReplyDeleteCertainly we could get up to the high 830's and reach for the 38.2% retrace. The reason I focused on the 830 level instead is because that has been a major pivot area so far and likely to keep prices close to it (plus the fact that it is the 23.6% retrace.
Lockness, that is the way I like it. Simple and focused. Too much out there for me to spend time on anything but the S&P. I'm glad you like it.
Rich, surprised how lame mkt action has been in Asia - expected bigger sell-off - your thgts?
ReplyDeletejacksoo,
ReplyDeleteLikely because they started their sell off a day earlier than us. Once we break 810 though, they'll feel it plenty over there.
Thanks Rich!
ReplyDelete