Weekend Update

Quite an interesting week we just had. Big up open on Tuesday to start the week, then a hard reversal down for the rest of the week.

We have dropped nearly 60 SPX points in a matter of days. This is a pretty bearish reversal. In terms of Elliott Wave, there is a very good chance that this rally is over. But there are still somethings that I want to point out before I myself confirm a top.

First off all, the 100 day moving average. We have not broken below the 100dMA since the start of this rally. Currently, it is sitting right at 1085. For those of you reading my blog for a long time, you know that 1085 has been a number that has popped up a lot. It has served has big support for a long time now. If we manage to break below it, we could drop big.

So as you can see by that chart, we are at a critical level in the SPX right now. We are sitting on a trendline coming from the August 2009 lows. The horizontal resistance from November and December is at 1083-1085, and the 100dMA(pink line) is at 1085.38. It would only be natural that the down move would stall here, before moving lower. Perhaps a bounce back to 1115? 1120?

Now to the interesting stuff, Elliott Wave.

First off, here is the daily count on the SPX, coming from our highs in October of 2007.

As you can see, the recent down move has been pretty sharp. The sharpest we have seen in a long time.

Now, I'm just going to throw some counts out there.

First, the Dow 1 minute chart.

So far, so good. The count looks pretty good. For now, I have labeled Friday's close the low of Micro wave [3]. If this is the case, expect a quick and small little bounce for wave [4] tomorrow, then a final flush down to complete subminuette wave iii.

Here is a similar count on the SPX. Except, this count suggests that subminuette wave iii is already complete.

If this is the case, we could bounce back to 1097-1100 early on Monday for subminuette wave iv, then move down to 1080 for wave v. This could complete Minuette wave (iii).

Here is a more "bullish" count. This count says that Minute wave [i] has already ended, and we are starting wave [ii] now.

If this is the case, we could bounce back to 1120 in the next few days. But as I said on the chart, I don't really like this count. Wave (iii) just doesn't fit well. But either way, it is still a possible count.

Here is another alternate, that is not as bullish or bearish as the others. I probably favor this count the most.

As you can see, this count shows wave (iii) as complete. It suggests that we perhaps bounce back to 1110 or so for wave (iv), before moving down to 1075 for wave (v), which completes Minute wave [i].

Basically, a lot of the counts are now suggesting that perhaps we move a lot lower. But there is no need to be bearish until we break 1085 on the SPX. Breaking and closing beneath this level will most likely confirm a chance in trend. Until then, it's best to stay cautious.

Here are a few charts for the VIX.

Pretty self explanatory. But really, this thing can continue to go up. But expect it to diverge soon.

Next week will be very interesting!