Market Update for Week of 10/26 - 10/30

After 3 long months of being nothing but up, the bears finally found a way to make the SPX close negative for the month.

After rallying for over 7 months, and gaining about 70% on the SPX, the Elliot Wave theory suggest that we may be at a very critical long term top. This rally was expected by many people who follow Elliot wave, but what was not expected was the violent strength to the upside. This rally was so hard to count, and many times the wave structures got very complicated. That is what a bear market rally is supposed to do.

The decline from 1576 to 666 was Primary Wave 1. The rally from 666 to 1101 was Primary Wave 2. The next wave down should be Primary Wave 3, which has to retest the lows of P1, or break them. Here is the daily chart of what Primary Wave's 1 and 2 looked like. I don't have all the little waves drawn on there, like the ones I post everyday on my 5 minute chart, I only have the waves that are visible on the daily timeframe.

The monthly candle stick is a topping one. The pattern is a Bearish Harami. First time we've seen it on the monthly chart. We need to close below the lows of this month, which 1019.95 on the SPX. If this is truly the start of Primary Wave 3 down, closing below that number should be no problem.

Here is a rough chart of what I think Primary Wave 3 will look like. Again, this is just a rough estimate for now.

The very short term wave structure calls for a minute wave 1 low early on Monday, if Friday was not the end of minute 1. My guess for the low is somewhere around 1020-1030. After that, we should get a bounce back up to perhaps ~1060.

Zoomed out view:

The US Dollar and VIX are both in uptrends. This should be bad for the rest of the market. It will be interesting to see how the first stages of Primary Wave 3 play out!

Market Update - 10/30/2009

Dow Jones Industrial Average: -249.85 or 2.51% at 9712.73

S&P 500 Index: -29.92 or 2.81% at 1036.19

NASDAQ Composite Index: -52.44 or 2.50% at 2045.11

NYSE Internals: 406 Advance. 2660 Decline.

SPX closes down for the month. The first time in 3.

As I said yesterday, we basically needed to close down for the bearish count to be right... and well, we did close down. A lot.

Looking at the wave count from the high, it looks like Minute wave 1 down could have ended today. Which means, we should get a Minute wave 2 up bounce sometime next week. We may see 1060-1070 again next week before going down again. Of course, this will be only true if we did bottom short term today. Regardless, if we did not put in a bottom today, I think we may do it early Monday before possibly reversing. Where will the low be? I'm guessing somewhere around 1025-1030.

I will post more charts and info in my weekend update. There are a lot of charts to review. But I feel comfortable to say that Primary Wave 2 is most likely over, and we are probably starting another long term downtrend, perhaps a re-test of the November(741)/March(666) lows... or a Primary Wave 3, which will break those lows.

US Dollar was up. Crude Oil was down and Gold was flat. VIX was up nearly 25% This is a sign that fear is coming back into the market. Financials led the way down today, as usual.

Market Update - 10/29/2009

Dow Jones Industrial Average: +199.89 or 2.05% at 9962.58

S&P 500 Index: +20.78 or 2.25% at 1066.11

NASDAQ Composite Index: +37.94 or 1.84% at 2097.55

NYSE Internals: 2504 Advance. 552 Decline.

Better than expected GDP makes market explode to the upside.

Yet, the A/D was only about 5:1 up. Not impulsive. Looks like wave 3 did complete at yesterday's lows. Today's bounce was a strong wave 4. We have not violated any wave rules on the SPX or Nasdaq, however the Dow did overlap some waves.

Regardless, the SPX count remains bearish. Wave 4 could have finished today. We hit the 38.2% retracement. We also back tested that all important trendline we broke yesterday. The bulls could not push it high enough to close back in the trendline.

Tomorrow should basically close down for this count to be valid. We must NOT break above 1075 on the SPX. If we do, the bearish count will be wrong.

US Dollar was down. Crude Oil and Gold were both up. VIX was down about 11% today. Financials led the way on the upside. The Nasdaq continues to remain the weakest of the 3 major indices.

Market Update - 10/28/2009

Dow Jones Industrial Average: -119.48 or 1.21% at 9762.69

S&P 500 Index: -20.78 or 1.95% at 1042.63

NASDAQ Composite Index: -56.48 or 2.67% at 2059.61

NYSE Internals: 323 Advance. 2783 Decline.

We finally broke the trend line from the March lows today. As I said a few days ago, once this trendline is broken. I will probably feel more comfortable in calling a medium to long term top. We clearly penetrated right through it, without any trouble at all. That is a strong sign that the bulls don't have enough left to fight back. Ended up being 9:1 down on the A/D.

Also, yesterday I said the Nasdaq count supported a new low today. That also worked. Nasdaq was the weakest of the 3 indices today, down about 2.67% The SPX bearish count is now going to be my main count. I think tomorrow we may get a small bounce early, but we will probably break today's lows by the end of the week.

The US Dollar also seems to be starting a new uptrend, which is not good for equities and commodities.

US Dollar was up today, Crude Oil and Gold were both down. VIX was also up nearly 12.5% The fear seems to be kicking back in. Tech and financials were leading the downside today.

Market Update - 10/27/2009

Dow Jones Industrial Average: +14.21 or 0.14% at 9882.17

S&P 500 Index: -3.54 or 0.33% at 1063.41

NASDAQ Composite Index: -25.76 or 1.20% at 2116.09

NYSE Internals: 1053 Advance. 1983 Decline.

Both of my counts from yesterday are still in play. We did make a slightly lower low today at 1060 on the SPX. About 5 points lower than yesterday.

Since the new low was not too far away from yesterday's low, this makes both counts still possible. The only reason I lean more towards the bearish count is that because we did not impulse up after the low. In fact, the Nasdaq was weak all day. Only the Dow was strong, due to the energy sector.

Bearish: We open flat or slightly higher before going lower later in the day.

Bullish: We basically explode to the upside in wave (3) of [3]. But like I said, at this point this is a weak count because of the Nasdaq.

The current count on the Nasdaq supports a possible new low tomorrow.

The Daily chart looks like it is starting to rollover and potentially topped.

US Dollar and Crude Oil were both up today. Strange? Gold was down. VIX was up again. Tech was by far the leader to the downside. Energy kept the Dow and SPX afloat.

Market Update - 10/26/2009

Dow Jones Industrial Average: -104.22 or 1.05% at 9867.96

S&P 500 Index: -12.65 or 1.17% at 1066.95

NASDAQ Composite Index: -12.62 or 0.59% at 2141.81

NYSE Internals: 714 Advance. 2323 Decline.

Market reversal in the morning was pretty significant. From the high to the low, it was roughly 26 SPX points.

As I said last week, there is a good chance that 1101.36 could have been the top. But recently, it seems that another possible pattern has emerged. The bearish count is that we have topped. The bullish count is that we still have 1 more high still to come.

The bearish count says that we have been coming down in 3 waves so far. With each wave dividing into small subwaves. The degree of the waves don't matter at this point. The count suggest that sub wave [3] of wave iii ended today. If this is the case, we should see some more sideways consolidation before heading lower.

The bullish count is pretty complex. But I have to mention is because it's still a possibility. Instead of looking at the waves as 3 subdivided waves down, the bullish count suggests that with was a triple zigzag down. In other words, a 5-3-5-3-5 wave structure. A normal corrective wave is a 5-3-5. Meaning 5 waves down, followed by 3 waves up, then another 5 waves down to complete the corrective pattern. A simple 5-3-5 zigzag consists of waves ABC. A triple zigzag has waves W-X-Y-X-Z. The X waves are usually a big thrust in the opposite direction of W and Y. Sometimes X waves come in 3 subwave patterns. I think this all makes more sense looking at the chart.

Again this is a complicated pattern, but I have to throw it out there because it could end up being in play. As we have learned from the past, the market loves to take the most complex path to confuse everyone.

If the bullish count is right, we will have another high, or retest of the current highs soon.

I don't want to confirm a top until this trendline from the March lows get taken out on the SPX.

Once we break down out of this wedge, the chances of a top being in will be very high.

US Dollar was up. Gold and Crude Oil were both down. Financials led the way down today. VIX was up nearly 10%

Market Update - 10/22/2009

Dow Jones Industrial Average: +131.95 or 1.33% at 10081.31

S&P 500 Index: +11.51 or 1.06% at 1092.91

NASDAQ Composite Index: +14.56 or 0.68% at 2165.29

NYSE Internals: 2046 Advance. 996 Decline.

We did break 1080 today, but bounced back nearly 20 points from 1074. Nearly an opposite of yesterday's price action. But the up move was not as impulsive as the down move. So I am going to stick with my count saying that 1101.36 could have been the top yesterday, and today was nothing but a little corrective bounce.

We came down in 5 micro sized waves from yesterday's high. Which ended Minuette wave 1. We retraced today in a potential 3 wave move, which ends Minuette wave 2. If this is the case, we should sell off tomorrow right from the open. If we don't sell off, a new high cannot be made for this count to be valid. If we make a new high tomorrow, I will be forced to change the count.

Zoomed out view:

US Dollar was flat. Crude Oil and Gold were also flat. Financials led the upside today. VIX was crushed again, pretty much gave up all the gains from yesterday.

Market Update - 10/21/2009

Dow Jones Industrial Average: -92.12 or 0.92% at 9949.36

S&P 500 Index: -9.66 or 0.89% at 1081.40

NASDAQ Composite Index: -12.74 or 0.59% at 2150.73

NYSE Internals: 999 Advance. 2038 Decline.

The top may be in today. We made a new high at 1101.36 on the SPX, then sold off pretty hard. About 20 points. Which is about 170 Dow points. VIX also jumped about 10% in less than 1 hour. The sell off was also on incredibly high volume. Much higher than the up move.

The goal was to break 1080. We hit it and closed at 1081. The futures sold off after the close, if its continues, we could see some more downside tomorrow and perhaps a strong break of 1080

All the gaps were filled, and the Daily chart looks complete. The candle stick was a shooting star, which is a bearish reversal signal.

Reversed from the top of the wedge with a topping candle stick:

As I said in the my weekend update: "The VIX also moves against the SPX. It's chart looks very similar to that of the US Dollar. But the pattern isn't quite so complete. Maybe 20 is the magic number there." The VIX hit 20.10 today. Looks like the bottom could be in. The 10% bounce at the end helps the case.

If we can manage to break 1080 tomorrow, it could be safe to say that the top is in.

US Dollar was down, but it closed well off the lows. Crude Oil was up, but it closed well off the highs. Gold also sold off at the end. VIX was up 7% at the close, and up 10% from its lows. Financials led the way down.

Market Update - 10/20/2009

Dow Jones Industrial Average: -50.71 or 0.50% at 10041.48

S&P 500 Index: -6.85 or 0.62% at 1091.06

NASDAQ Composite Index: -12.85 or 0.59% at 2173.47

NYSE Internals: 1047 Advance. 2007 Decline.

SPX did not cross back above 1100 today. In fact, we broke 1090 intra day, but not 1080.

The blue channel was finally broken today. Looks like we are retesting it. Retest should be somewhere around 1095-1098 tomorrow. If we continue downward and break 1080, good chances are that the top could be in because the waves are starting to overlap.

The reason I am hesitant to call a top at those moment is because we did not impulse down today. The bounce up from today's lows did look corrective, but regardless, the A/D was about 2:1 down. Not very strong to the downside.

The two important numbers to watch for tomorrow are 1080 and 1100. If we break 1080, then more downside may be coming. If we break 1100, we are probably going a little higher.

US Dollar was up, Crude Oil and Gold were down. VIX was also down. This is a sign of complacency in the market. There is no fear at all. Bullishness is at an extreme.

Market Update - 10/19/2009

Dow Jones Industrial Average: +96.28 or 0.96% at 10092.19

S&P 500 Index: +10.23 or 0.94% at 1097.91

NASDAQ Composite Index: +29.52 or 0.91% at 2176.32

NYSE Internals: 2241 Advance. 808 Decline.

Finally hit my target of 1100 on the SPX today. I've been calling for 1100 for a while now, and we hit 1100.17 intra-day.

This could have been the high, but I still think we will have 1 more minor high tomorrow, maybe we hit 1105. My reason being is that from the lows of Friday, the waves are really hard to count, but from what I can see, we only have 4 small waves up. Most of the day was sideways/down after we made the high, so it could have been a wave 4.

The top of the blue channel I have drawn is also around 1105-1106. We may hit that early tomorrow. If we do, we could potentially sell off, which could mark the top for now. We can also just open down tomorrow. If we do, we have to break 1090, then 1080. Once those are broken, good chances are that the top might be in. Also watch for a break of 1108 on the upside. If 1108 is taken out, good chances that we make it up to 1120.

US Dollar was down today. Crude Oil hit $80. Gold was also up. Financials were lagging today. VIX and SPX were both up.

Market Update for Week of 10/12 - 10/16

Short term: Bullish

Long term: Bearish

Another up week in the books. S&P500 was up about 1.4%

For the last 7+ months, the market has had one if it's biggest rallies ever. More than 65% in such a short amount of time. While the market continues to be strong, a lot of technical signs are starting to turn around.

The SPX has been showing signs of completing its full wave structure for Primary Wave 2. On the daily, we have retraced nearly 50% of the entire move down, which is common for wave 2's of all degree. On the minor scale, we have room for maybe 1 more wave up, which could take us a little over 1100. The 50% retracement is at 1122. Somewhere between 1100-1122 is a good upside target for now.

There also continues to be negative divergence on the weekly and daily charts. The market is getting weaker as it goes higher. For SPY, there was an unfilled gap at 110.34, we hit 109.72 intra day. This may be close enough for a fill. But if SPX makes it to 1110, SPY should get the complete gap fill.

The US Dollar has been falling for nearly 1 year now. As we know, the US Dollar moves in the opposite direction of the general market. So naturally, the Dollar has been down trending in it's Primary Wave 2, while the SPX is in it's Primary Wave 2 up.

Primary Wave 2(P2) for the Dollar seems to be coming to an end. Which means, P2 for the SPX should also be coming to an end. After this, the Dollar should rally to either test it's highs, or make new highs. Which means, the next move for the SPX should be to either test it's lows of March, or make new lows.

The VIX also moves against the SPX. It's chart looks very similar to that of the US Dollar. But the pattern isn't quite so complete. Maybe 20 is the magic number there.

Market Update - 10/16/2009

Dow Jones Industrial Average: -67.03 or 0.67% at 9995.91

S&P 500 Index: -8.88 or 0.81% at 1087.68

NASDAQ Composite Index: -16.49 or 0.76% at 2156.80

NYSE Internals: 1041 Advance. 1970 Decline.

The Bulls couldn't get the weekly close above 10,000.

We did break the yellow trendline I was talking about yesterday. But we did not get the wave 4 and 1 overlap. The overlap lies at 1075 on the SPX. If we break 1075, good chances that we could be heading lower. For now, I am going to label today's low as the end of wave iv. We should see a new high above 1096 on Monday or Tuesday if that is the case. If Monday is to gap down and break 1075 and 1065, good chances are that we will head a lot lower. We would need to break this new potential blue trendline I have showing in the picture first.

If we do continue higher, 1100 will most likely be met.

The reason I believe that we have not yet topped is because we really didn't impulse down. The A/D never got too bearish, volume wasn't heavy too the downside, and the waves down look corrective. But we have to keep an eye on those key support pivots, if we start breaking these pivots, it is likely that we have topped.

US Dollar was flat, up only .09%. Crude Oil nearly hit $80 a barrel. Gold was also slightly up. Financials were leading to the downside today, followed by the Semi's. VIX was down and the SPX was down... strange.

Market Update - 10/15/2009

Dow Jones Industrial Average: +47.08 or 0.47% at 10062.94

S&P 500 Index: +4.54 or 0.42% at 1096.56

NASDAQ Composite Index: +1.06 or 0.05% at 2173.29

NYSE Internals: 1517 Advance. 1500 Decline.

As I said yesterday, expect a small little pullback to test 1080 before going higher. We got to 1086 on the SPX, and 1080 on the ES Futures.

We made new highs today, which was the minimum requirement for the next wave up. It could be over, but I still think we touch 1100 first. A lot of Fib expansions lie between 1097-1100. That should also fill the gap from last October. We got to 1096 today, could that be close enough? We'll find out!

Until that yellow trendline is broken, I am going to stick with my theory and think that 1100 will be hit. If we gap down tomorrow, and stay below the line, it may be likely that the wave has completed.

US Dollar was flat. Crude rallied hard. Gold was down. VIX was down about 5% Energy and Materials were the leaders today. Financials and Tech were both lagging.

Market Update - 10/14/2009

Dow Jones Industrial Average: +144.80 or 1.47% at 10015.86

S&P 500 Index: +18.83 or 1.75% at 1092.02

NASDAQ Composite Index: +32.34 or 1.51% at 2172.23

NYSE Internals: 2278 Advance. 769 Decline.

We got our answer today. Market wants to go higher... surprised?

Clearly broke 1080 today. Nearly made it to 1100. Dow hit 10,000. Given that we are so close to 1100, I just don't see us missing it now. The SPX didn't come this far to miss 1100 by a few points. We should see that number by the end of the week, or early next week at the latest. But we will probably see a small little wave iv pullback first, perhaps to test the breakout point at 1080.

1100 is just the minimum target. I guess 1122 might be another decent area to "top." 1122 is the 50% fib retracement of the entire bear market. The last major bear market retraced 53%

The wave structure also supports a touch of 1100. 1097 is the mark where wave (C) = .786 * (A). If C is to equal A, we're talking about a target of 1158. But that seems a bit too far to reach with this wave count. Somewhere between 1097-1122 seems logical... for now.

US Dollar was once again crushed. Gold was flat, Crude Oil was up. VIX was also flat. Financials were by far the leaders today. XLF was up nearly 3.5%

Market Update - 10/12/2009

Dow Jones Industrial Average: 20.86 or 0.21% at 9885.80

S&P 500 Index: +4.70 or 0.44% at 1076.19

NASDAQ Composite Index: -0.14 or 0.01% at 2139.14

NYSE Internals: 1645 Advance. 1354 Decline.

SPX tests 1080 double top area on lightest volume day of the year.

My counts are still in play because we did not break 1080 on the upside. Until we do, all of my wave counts are still valid.

This still could be wave 2 for a 100% fib retracement. With the big wave 3 down to follow

This could also still be the end of wave 1 of 5, and we started the wave 2 pullback to test the 1050 area before heading to 1120+

But... we still could have the truncated 5th wave, since usually truncated wave 5's are a double top.

We also continue to get some heavy negative divergence on the Daily charts. Just look at the MACD and RSI. Market is getting weaker as it goes higher. Not a good sign.

Today's candle stick could also be a potential topping doji. We need confirmation for that though.

As I said Friday, today could have potentially been the day that decided what the market does. Guess that didn't happen. Basically, if we break 1080 to the upside, we have a really good shot of getting close to 1100. If we break 1039 to the downside, good chance we go lower to test the lower 1000's. But we all know that the market likes to confuse everyone. I guess we just have to sit and wait. The answer should be coming soon. Could the answer be Dow 10,000?

Dollar was down, Crude and Gold were up as a result. Energy, Financials and Semi's were the leaders today. VIX was relatively flat, down about .48%

Market Update - 10/9/09

Dow Jones Industrial Average: +78.07 or 0.80% at 9864.94

S&P 500 Index: +6.01 or 0.56% at 1071.49

NASDAQ Composite Index: +15.35 or 0.72% at 2139.28

NYSE Internals: 1815 Advance. 1186 Decline.

I guess I can throw out my first bearish count from yesterday since we didn't explode to the downside.

This is one of the many flaws of Elliott Wave. We really don't know the wave structure until a good part of it is complete. That's why using Elliott Wave alone doesn't always turn out too well.

Once again, the market is hanging on a key pivot at the 1070 area on the SPX. Most of the day was sideways hanging around this level. We managed to get a slight break at the close, but nothing too major. Volume was low. A/D wasn't too impulsive. Not even a 2:1 up ratio.

My second bearish count from yesterday was that we are going to complete a truncated 5th wave. Which means that the "top" for the wave structure will be lower than the "top" for the price structure at 1080 on the SPX. The reason I want to lean more towards this count is because we now also have 5 waves up from our wave (iv) low. Of course, this could have enough steam to test the highs at 1080, but it shouldn't break too much higher above that. And truncated 5th waves are common after a long and extended 3rd waves. Similar to the one we experienced throughout most of September.

The bullish count is obviously that we are going higher than 1080, perhaps 1100-1120. Even if the bullish count is in play, I am still expecting a very small down turn to test the 1040-1050 area, then explode to the upside.

Monday is again a key day. If we go any higher, then the bullish count is in play. If we explode to the downside, then the bearish count will most probably we in play. But we need to break 1039 in order for the bearish count to have some confirmation.

Dollar was up, Crude was up, market was up. Even the dollar strength couldn't bring this market down. Just shows how much bullish sentiment there is. Gold was slightly down. VIX was also down over 4%.

Market Update - 10/8/2009

Dow Jones Industrial Average: +61.29 or 0.63% at 9786.87

S&P 500 Index: +7.90 or 0.75% at 1065.48

NASDAQ Composite Index: +13.60 or 0.64% at 2123.93

NYSE Internals: 2205 Advance. 819 Decline.

Once again, I'm sorry for not being able to post everyday this week, I've been a little busy...

The market is continuing to confuse all of us. There is really no clear cut direction. This is why I am going to post a few charts, naming all the possibilities. We'll have to wait and see which wave structure will play out, then we can build on from there.

First count: Bearish

This is the original primary count I have been following. Price and wave top was at 1080 on the SPX. Since then, we have been starting a new downtrend. So far, waves (i) and (ii) have completed. Wave (iii) down should be starting soon.

Second count: Bullish

This recent down move was a wave [iv] and we are not starting wave [v] up to finish the uptrend. This is possible because the top of wave [i] was 1018, and the bottom of wave [iv] was 1019. By the rules of Elliott Wave, waves 1 and 4 may never overlap. 1019 and 1018 are NOT overlaps. We have also completed 5 waves up. This could be the end of wave (i) of wave [v]. This count could take us all the way to the 50% fib retracement mark at 1122.

Third Count: Bearish

This count is also in play. The price top for Primary Wave 2 was indeed 1080, but the wave structure ended today with a truncated wave 5 at 1070. A truncated wave 5 means that wave 5 did not exceed the high or low of wave 3. 1070 is below 1080. So 1080 may have been the top, but 1070 is the "top" for the wave structure. This means, we should now be starting wave (i) down soon.

This chart below shows how today could have just been a backtest of the yellow trendline that we broke. Now we have to break the bottom white line to confirm that the uptrend has ended.

Dollar was down. Crude oil and Gold were both up as a result. Neither financials or techs were leading today. VIX was down as well.

Time will tell us which count is right! :-)