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Sunday, March 29, 2009

Here is the Bearish Option

Ok I promised a bearish option this weekend and an alternate count. The bearish option is that my count on Thursday calling the top to wave 1 based on an ending diagonal that played out on Thursday holds up. The market then gapped down Friday and traced some "rope-a-dope" waves that looked like "threes". So I suggested that perhaps end-of month window dressing means that it was not quite finished its last few ending waves.
However, someone mentioned that window dressing actually ended Friday because the books were closed for the quarter then so maybe I have that assumption wrong that it lasts through the end of month. I just am not that knowledgeable on that stuff.

The CPC is also heading back upwards which usually means stocks will follow down. So I failed to mention that was also bothering me. I don't have a move down other than to 804 based on Friday's waves. So for this to be a wave 2 deep correction, perhaps we are only seeing the opening stages.
But I thought I'd post this /es minis chart which includes A/H's. Sometimes looking at things in a different light adds credibility. The ending diagonal is not perfect by any means, the wave 2 is supposed to retrace deeper. That could be the deal breaker perhaps. The ending diagonal wave 2 only retraced like 24% and guidelines say it should be 66-81%.
Thats the best I can do for a bearish option is by saying my wave 1 top call on Thursday will hold true and looking at this chart, that could very well be the case. I would guess that if this is Wave 2 down, I think the gap at 768-772 gets closed at least soon enough.


  1. Hi Dan,

    In your final sentence, do you mean the gap at 768-772 gets closed?

  2. Oh yeah! Sorry good catch, I'll change that

  3. Hi, dan. Thanks again. The window dressing for the quarter actually ended on Thurs. 3/26 for trades settling on 3/31.

  4. Yup - they follow t+3 and some get an early start. I thought we'd tank Friday. DE you know I chart a bunch of stuff. I'm almost thru updating everything. Please see my most recent blog post for my case for the top being in. Bottom line, ending patterns everywhere and indicators topping out (finally). Thanks for all you do. Your work is exceptional. GL this week.

  5. good post, and ive read some that say it is 2 days prior which it send....others say its still to the last day.

    depends on when the mutual fund i suppose, and when the settlement is, and also "if" they have to provide their prospectus on ezactly the 1st day of the new qtr.

    I thought we go down friday too, but not b/c of that. More just b/c smart longs would take PROFITS after a huge gain week (well actually 2 weeks). Same reason we would have squeezes on fridays in huge down weeks.

    804 i think is the line in the sand, a key support that should hold, but if not, might be a doozey. Low of futures is 805 tonite, so shall see.

    great work man...

  6. To Shanky:

    Thanks for your charts and comments on your site tonight. Very helpful and they ring true.

    I tried to post this comment on your site, but the system kept telling me "Can't post comment. Illegal characters in URL."

    Can you fix this, or post instructions for how people can bypass this problem and post comments?


  7. To Shanky,

    I checked your site again and noticed quite a few of your posts have no comments. I hope you know that you get more visitors than that. It's got to mean that others have run into the same problem I have (that I described in the post above). If you fix this obstacle to comments, you'll enjoy a lot more interaction with your readers! Good luck!

    P.S. You say you expect a "shallow" wave 2 pullback. What's your target for wave 2 (a) and (c)? Do you foresee a zig-zag? Thanks.

  8. I'm not sure about the commentthing, thanks I'll look into it. As far as a wave 2 pullback, Its looking zig-zaggy so far and how deep I would at least think that gap at 768 gets closed. After that is anyones's guess. I'll be looking for 750 support if it gets further than that then 742 and 733,etc

  9. Hi Dan,

    Were you responding to my comments to Shanky, or were you passing on Shanky's reply to me?

    Also, you recently posted a really clear chart of the 1938 bottom and rally (for comparison with the March 2009 bottom and rally). Can you please tell me where I can find that 1938 chart again?


  10. Dano try and post a few comments intraday will get more views....and I refer to your site during the day for recs....but i know you are working so probably not possible........kli

  11. Nice work as always, We are now on the same page, i'm still holding SKF $89.14 from last Wed, i will be taking 50% profit today and the rest at $SPX555. I will go long FAS if it hold.