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Sunday, May 17, 2009

Technical Hurdles to the Upside

Just looking at things objectionably, the Bulls perhaps are letting the market slip away a bit. A 5 day downtrend is now in place. Bullish daily sentiment was at a 2007 Oct peak. There are many ways to count this move down as I have thrown up just about every possible way it can go the past few days. You could have a double zig zag down that ends a bit lower on Monday and rebounds in a big way off of 875. You could have a series of "1"s and "2"s as I have shown here and EWI has as its Primary count. On this chart, I list some bearish reasons for the market not heading back up above 900.

However there ARE some bullish potentials going on. On Friday the NASDAQ and Financials show divergence. They did NOT have lower lows and in fact stayed high above their lows from the previous day. In addition there is a bit of positive divergence on the 15 and 30 minute charts and a smidgen on the 60 minute. Friday could easily be seen as ending in a "falling wedge" shape which is a potential bullish reversal. In addition the market is near the magical 875 mark and big money may be laying in wait to buy.

Also day after OPEX Friday is always a crapshoot. Did big money short the market only to have to buy it back this week? I am not that smart on options stuff so I just throw food for thought in there. In addition, bears are likely nervous as this rally has worn them out. Short covering alone can create some spikes up.

Overall it seems clear the near term "top" is in place. An (X) wave correction is playing out and it is not likely to be a smooth event downward. Its probably going to chop in a general downtrend (unless some form of flat plays out - we'll know soon) and even wear on Bear's patience. How long and in what form is any one's guess at the moment because there is simply not enough wave information to conclusively say one way or another what general form it will take. Will it take the form of a giant flat and make it back to the 200 DMA and close a gap just above at 907? Or will it be some convoluted zig zag or even some goofy double three corrective pattern of some sort.

No one can really know at the moment. So it is a day to day thing to say the least. However don't lose sight of the end. I think we are a long way, weeks, from finding the (X) wave "bottom". Bullish sentiment I think needs much more of a correction. Bull market this is not! And I am fairly confident that X wave bottom will be at least an overall rally correction of 38% or more. Once 875 breaks, its not entirely clear where the market will eventually settle.

I tend to throw a lot of charts up because....its fun making them. I am working on organizing my public lists in a way to show these charts and have a "rank" on them on order of preference and lists reasons why on each chart. I have just been too lazy I guess.

I do try and "think outside the box" a bit as an EW chartist because sometimes the obvious is not and vice versa. However, sometimes it IS just what it is. The market is in a 5 day downtrend that much is clear. Its now up to the bulls to break that, not the bears. Bulls are now on the defense and the bears have their best 3 point shooters in the game. Positive divergences have been known to get absolutely crushed. We seen that a lot during P1. It can happen in a P2 (X) wave.


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