Market Update - 6/30/2010

As I said yesterday, we could get a quick bounce back towards 1050 on the SPX. We got to 1048 and then started to reverse. We had a nice 3 PM reversal today, and we ended up making new lows and briefly breaking below the key pivot of 1029. With the breaking of 1029, this market has taken a lot of technical damage now.

Currently, I see 2 possible situations playing out. Both are bearish, however one is a little more extreme.

The first count, which is my primary count, is that we are in wave iii of (iii). This means we should have very swift and powerful down moves in the next few days.

The only option really for this count is to just keep going down with very small bounces along the way.

The second count suggests that we are about to complete the entire wave (iii). This makes a little bit more sense. Due to the July 4 holiday coming up, we could have light volume with some sideways action. This would be the perfect situation for wave (iv).

But, we could get one more quick low before we start the wave (iv). 1014 sounds like a perfect target.

So either way, we go down before we see any sort of bounce. It's just a matter of how powerful the down move is. Anything huge with strong internals will mean a wave iii of (iii).

If we do get a bounce, 1044 and 1050 are the key pivots to the upside.

And as you can see, 1029 is a very key area.

If the bulls lose full control of this pivot, we could drop further.

Market Update - 6/28/2010

I apologize for not posting in a few days, I have been really busy.

Last week, we left on the possibility that we were starting Minor wave 3, a new and more powerful down move than what we have been seeing. I think today was perfect proof for that. We have a nice looking impulse starting to form from our highs. A lot of signs point to this being Minor wave 3. We have broken the very important pivots for 1044 and 1040. This area, as we know, has been very strong support. We broke it today. Internals were also 60:1 at the close, and hit 155:1 intra-day. We are setting records here.

The primary count suggests that waves we are in subminuette wave i of minuette (iii) currently. We could get a quick bounce back towards 1050 for wave ii before we crash in wave iii. But remember, this is a wave 3 to the DOWNSIDE. Don't be fooled by any upside corrections, they could be very small - if they occur.

Breaking below today's lows will be bearish. We could get to 1029 easily. Key pivot to the upside is 1050.

Speaking of 1029, this is our next major pivot.

1029 was our low in early November of 2009. If we do in fact break below this, we could get to the lower 1000's easily.

Market Update - 6/24/2010

The key pivot of 1090 failed to hold. As I said a few days ago, if this level was broken, it would be very bearish. There is good evidence now that Minor wave 2 may have ended. However, breadth doesn't support wave 3 action, but we do have 5 waves down off our highs. A pretty good looking impulse.

I don't want to try and catch a bottom, but I am going to label today's low as the end of wave (i). We could get a bounce back to 1090-1100 soon for wave (ii).

The 5 wave structure from the top does look complete, but again with this being Minor wave 3, expect downside surprise.

Here is a rough wave count from the highs @ 1131 a few days ago. Again, this is what I see on the smaller time frame.

If this is going to play out, we could get a nice drop early tomorrow, as we are currently within wave (3) of [5] of iii.

The daily charts also starting to roll over. We have gone down a little bit too much for this to still be a wave [b].

If we break that trendline, we could easily get to 1040-1045.

The only concern I have is that the internals are not confirming any sort of wave 3. Wave [b]'s are typically not that deep, but the market could be trying to fool us. Any upside bounce needs to remain below 1100.

Market Update - 6/22/2010

1095 was the lower end of my range for wave [b] that I talked about yesterday. The SPX closed right on it.

According to the current primary count, wave [b] of 2 should be over. This means tomorrow we start a wave [c], which should take us higher over the next few days and perhaps even break 1131.

Wave [b] retraced almost exactly 38.2% and within wave [b], wave c = wave a. This is a perfect textbook wave [b]. Which means tomorrow we should be starting a new uptrend.

In order for this count to be valid I think that 1090 should hold. 1090 is a very key pivot.

As I have marked on this daily chart, 1090 marks our gap up on 6/15. Closing this gap will be bearish.

Any further down move with strong internals could imply wave 2 is over and we have begun wave 3.

Market Update - 6/21/2010

A huge reversal day today. We had a really big open, nearly 14 SPx points. We made our high at 1131 then started to slowly come down. Later in the afternoon, the sell off accelerated.

From our lows at 1040 a few weeks ago, we have been tracing out a Minor wave 2. We have been tracking minute wave [a] since then. There were some areas where we thought wave [a] would end, but it kept exceeding those pivots. But with today's reversal, it may be safe to say that wave [a] has ended. We have also retraced 50%

Wave [b] could take us to anywhere between 1095-1100. This is the target for now, of course it may change as more waves within [b] start to form.

On that same chart, I have the alternate count marked. The alternate is that the entire Minor wave 2 is over, and this down move will be the start of Minor wave 3 instead of just a [b] wave within wave 2. On any down move, it will be key to watch the internals. If the internals are very strong to the downside, it could be a wave 3.

The daily candle stick is also a pretty bearish one. The fact that we closed today's gap up is also very bearish.

Market Update - 6/16/2010

The market does not want to let up on this up move. We squeezed out another high again today, although it wasn't a big break of yesterday's high. Today was also very choppy and volatile. Expiration coming up this Friday probably has something to do with it.

There is now a clear wedge that has formed from our lows last week. As long as we remain in the wedge, we are in wave [a]. Once we break to the downside, there is a good chance that we are in wave [b]. Until then, the trend is up.

1110 and 1105 are the key pivots. If we break below these, it could signal that wave [b] has started.

There is an alternate count that could also be in play, and this count is more bullish than the primary count. This count suggests that we are only in minuette wave (iii) of minute [a]. This means we still have wave (iv) and (v) to come before wave [a] is complete.

If this count does play out, Minor wave 2 could be a deep retrace, to perhaps 1150 or 1160.

It will be key to see how any pullback plays out. Wave [b] and wave (iv) could both be sharp corrections. In the alternate count, the wave (ii) was sideways. This means wave (iv) could be sharp, as wave 2 and 4 are usually not the same.

A deep retracement for Minor wave 2 could also set up a huge head and shoulders pattern. A lot of the head and shoulders in the past have failed, because everyone seems to know about it and then it never plays out.

Either way, it could be an interesting set up if we get a deep retracement for wave 2.

Market Update - 6/15/2010

We seem to be caught in what seems like another stubborn corrective wave 2. We now also have what seems like 5 waves up from our lows last week. The market is starting to look a bit tired up here, and a little extended as well. We have risen more than 6.5% in the past week, so we are a little overbought.

I am going to label this 5 wave move as wave [a]. We could have a 5-3-5 corrective zigzag forming for Minor wave 2. We have completed 5 up, so we should have 3 waves down coming to take back some of this up move, before have our next leg up.

For now, I expect wave [b] to come somewhere around 1080-1085. Once wave [b] starts, and the waves unfold, it will be easier to make a target. But that area is the retracement target for now.

We also closed the huge gap down that we had on 5/20. This gap was a target for the bulls, and they seemed to have pushed us all the way back.

This area should serve as some short term resistance.

Market Update - 6/14/2010

As we have continued to bounce over the past few days, my alternate count is now in play. I have marked the most recent low as the end of Minor Wave 1. The old count had Minor wave 1 ending at the crash low, but the recent wave structure has not supported that. We seem to have a clear leading diagonal down from our highs. Wave 2's typically retrace 50 to 61.8% of wave 1. The current 50% mark is around 1130. At this point, I don't know if we will make it that high. We need more waves to form first.

For right now, I have wave [a] of 2 ending at today's high. This means we are now in wave [b], which should retrace some of the up move before going back up. 1075-1080 is the range for now.

Wave [b] could be very quick, so we have to watch for possible reversals back up at any time. Also, on any down move, watch the internals. If the internals are very strong to the downside, it could imply a wave 3 instead.

The daily candle stick is also bearish. We could get some follow through for this shooting star.

The Russell has also broken out of it's wedge. It has retraced 38.2% as well.

We could get back down to the 640 level for wave [b].

Market Update - 6/10/2010

The market gave us the exact opposite of what I expected. The move today was pretty powerful, and it took out the highs of yesterday. The internals were also fairly strong. 52:1 at the open, 41:1 at the close. Typically, only a wave 3 or a wave C will produce a move like this. I am leaning towards this up move being a wave c rather than a wave 3. Despite today's wave being impulsive, the waves behind it are still very choppy. And for this up move from the lows on Tuesday, it's very hard to count a smooth impulse.

So basically the current count has only one option. The market has to be down tomorrow, or it is very likely that this count is wrong. We have already had a pretty deep retrace for wave (ii). 1092 is the 78.6% retracement level, and usually once that fib level is broken, the count changes.

So the open could tell us whether this count is right or not.

Now if we continue to climb higher over the next few days, we could have something completely different on our hands. I think it could be similar to the pattern we had in October 2007, when the market first started to fall. Here is the chart of the SPX in October/November of 2007.

The first wave down was a leading diagonal. It was in a falling wedge and waves [i] and [iv] overlapped. After we broke over the wedge, we had a deep retrace for wave 2.

Now here is the chart of the Russel 2000 index today. The reason I am using the R2K is because the pattern fits a little better on it. Plus, it made new lows on Tuesday. The Dow, Nasdaq and Russell all made new lows on Tuesday. The SPX did not. That's why I am not using the SPX, the pattern doesn't fit the same way.

Anyways, the pattern for the R2K today looks very similar to what happened on the SPX in late 2007. If Minor wave 1 is over, we could get a very deep retrace. This could put the Russell around 680, and the SPX around 1125-1130.

The SPX also has the same falling wedge, but the only difference is that it did not make new lows on Tuesday like the other indices.

Breaking above could send us higher.

Another thing that could be fueling this up move is a falling USD and a rising EURO. As we know, the USD was getting a little over bought, and the EURO was oversold.

With both if these retracing a little bit, we the markets could get a bounce too.

Market Update - 6/9/2010

The waves played out just as expected today. Yesterday, I was expecting 1075 for minuette wave (ii). The reversal today could also mark the start of wave (iii).

The wave structure we have currently it setting up for a very bearish down move to come. We could be entering the heart of wave [iii]. The current count is that we are in minuette (iii) of minute [iii] of minor 3 of intermediate (1) of primary [3]. If this wave plays out the way it should, we could have a very big down move coming our way. All the bounces will be limited and hard to predict.

But on a shorter time frame, we could get a test of 1065 early tomorrow before falling. Again, we may or may not get the bounce. If this is a powerful wave 3, bounces will be very limited.

Breaking below 1050 and 1040 will be exteremely bearish. If we break 1065 or 1070, we could have a slightly different count. So watch for those pivots.

The daily charts are also set up for a big drop to come. We have broken the trendline, backtested it, and we have backed off about 15 points.

The set up is there for the bears to push it down. The daily candle stick is also a shooting star.

Market Update - 6/8/2010

We did make new lows today, but we also got the bounce that I was expecting. Looks like we are in minuette wave (ii) now.

We chopped lower early this morning. Looks like that was the final stages of wave v. So today's bottom is marked as the end of minuette wave (i). I am expecting a 50% retracement for the up coming wave (ii). The wave structure also looks choppy, so this implies a correction.

For now, this should put us to some where around 1075. There is also resistance at 1080. In terms of wave counts, those are our 2 targets. Watch the internals on any bounce.

Looking at the daily chart, we may end up backtesting the trendline that we broke yesterday.

I don't see this line being broken without a fight, so we could easily get back up to it in the next few days. Somewhere around 1070-1071 is the target for that.

Also, we touched the very important zone between 1040-1044 today. As we know, this level is very important.

If we do break below this area, we could get some quick selling taking place. It could easily take us to 1020.

The only bullish thing I see is that the Nasdaq 100 has not confirmed the new lows. It has not even broken its May 6th crash lows.

It seems to be in a contracting triangle. If it breaks to the upside, we could have a very powerful move up. So keep an eye out for that.

Market Update - 6/7/2010

The sell off that we have had over the past few days has been very impulsive. The internals on Friday were almost 120:1 at the close. This is exteremly bearish. We also had follow through today and broke some key pivots. It seems like the market is picking up momentum to the downside.

We have a very nice looking impulse pattern down from our highs around 1105 last week. It looks like a text book 5 waves down. The pattern looks complete for now, but with the downside momentum, I wouldn't be surprised if we continue to sell off. After all, we are in a very powerful wave [iii] down.

However, I will be conservative and mark today's low as the end of wave (i) of [iii]. Because of the oversold conditions, we could see a quick bounce back towards 1075-1080.

But remember, the primary count is that we are in wave [iii] of 3. This is going to be a very powerful wave to the downside if it plays out the way it should. So don't be surprised if we continue to sell off with very little bounces.

The key pivots for tomorrow are 1040 to the downside and 1071 to the upside.

We have also closed below the expanding pattern that we have had on the daily charts. This could easily take us below 1000 on the SPX.

The daily counts also are in favor of more downside to come this week.

Watch for those pivots tomorrow!

Market Update - 6/3/2010

Ovbiously Minuette wave [ii] is not over yet. The up move for the past few days has taken out the bearish count. We also broke the previous highs at 1103.

We have some resistance coming up at 1107 and the gap fill is at 1114. These are the key numbers to the upside going into tomorrow.

The wave structure is still choppy, so that implies we are in some sort of a correction, rather than an impulse up.

We also have a bear flag on the daily charts, the current target is around 960.

This would also make a nice 1-2-3 down.

We also have a giant head and shoulders pattern setting up on the daily chart. Now I know that this pattern has failed many times in the past, but that is because of the strength we had to the upside. If this down trend does continue, I don't see why this H&S should fail.

The target is much lower from where we are, but we still have to form the right shoulder, somewhere between 1125-1150 is the target for that.

Market Update - 6/1/2010

The sell off at the end paints a very bearish picture going into tomorrow. The move down was pretty swift, some sort of wave 3 perhaps.

The primary count is that wave [ii] could have already ended, and that gap at 1114 may not be filled for a long time.

If this is the case, tomorrow should be pretty bearish right off the open. The only reason this count could be wrong is because the waves from the high @ 1103 don't look very impulsive. We will have our answer tomorrow.

Even the daily charts look like they are starting to roll over again a little bit.

If we break that trendline, which is around 1066 for tomorrow, we could have a move down to at least our lows around 1040.