Market Update - 8/17/2009

Dow Jones Industrial Average: -186.06 or 2% at 9135.34

S&P 500 Index: -24.36 or 2.43% at 979.73

NASDAQ Composite Index: -54.68 or 2.75% at 1930.84

NYSE Internals: 339 Advance, 2736 Decline

Looks like my Head and Shoulders seems to be playing out.

We did manage to close the gap at 98.82. We still have 1 more gap to fill at 97.65, which I think should get filled soon. That 97.65 area also lines up with some nice support and is also near the target for the H&S. If we break that 97 area, I think we go test 96.11, which is our breakout point for this recent rally.

We do seem to have 3 waves down from our high at SPX 1018. I have labeled these as an ABC. Now is this ABC down the end of Minor B or is it a part of a larger correction in store? Well, I still think we see the lower 970s on SPX, and perhaps mid 960s. Which also lines up with 96.11-97 on the SPY. We have also retraced just over 23.6% of the rally from 869, and since we have this labeled as a minor wave b correction, it should hit the 38.2% mark at 961, which is close to our breakout point of 956 on SPX.

As far as the DOW is concerned, we bounced from the 23.6% retracement, and closed above it. If we can break through that, we probably test 9,000. If we break 9,000, we probably test the 8,920 area.