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Monday, June 1, 2009

SPX Count


Triangle breakout on the cash index. Created a big gap up today. All the old gaps have been closed. Bumping up against 943 - 950 resistance.

200DMA is now at 926 (and dropping). I am assuming this is all a part of a Minute wave [i] breakout. So wave [ii] would be the expected backtest either the upper triangle trendline or the 200DMA, or both depending on when it happens.

I have Minute wave [i] projected to top out at about 950 SPX. Potential for a violent subwave (iv) dip prior to it topping and it might not top until tomorrow or Wednesday.

There are lots of reasons for the market to go back to the lower 920's or even lower at least:

1.) Wave [ii] retraces normally 50%
2.) Backtest the 200DMA
3.) Close the gap from 919-923
4.) Backtest breakout support 914 SPX, and/or triangle upper trendline.
5.) Probably a lot of pissed off bears will short the market near 950.

One or all of those should or could happen. A backtest should hold and then the market is clear to advance toward 1000 eventually.

Odds of it being something else? Well only if a triangle backtest fails miserably. I don't see anything TA-wise that says that should happen. The path of least resistance seems to be up (900 support).

17 comments:

  1. Today's move look like Jan 09

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  2. I agree. Do you think so Dan?

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  3. Is it possible that this is just the second half of the X zigzag completing? I don't see any rules saying that the X cannot make new highs. Do you agree?

    I never like triangles as second waves (however this could be some other correction, like a wxy of some kind).

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  4. I still do not like the triangle. You have e of the triangle not going very deep telling us that the market is strong.

    then you have a lead diagonal right after it telling us the market is not strong.

    furthermore the leading diag. should have been retraced by 78.6% or so if it were a 1st wave but it was not so the market is suddenly strong again. it looks more like a leading 'a' corrected by a 'b' triangle.

    saying that the so called e wave was actually weak would make more sense. we can do this by calling this a deep x of X, then the market picking up momentum as it went along after that.

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  5. No I don't like the count either but I ain't going broke over it if you know what I mean.

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  6. or perhaps X is over and we have a some type of Y forming to complete (X).

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  7. Lots of belief that we go back down to 920 but you end the post with "the path of least resistance is up"? Is that to cover your ass in case you are wrong? It totally contradicts your entire post.

    -bd

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  8. Overall the path of least resistance is up.

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  9. EWI is the one that covers its ass in ALL of its M,W,F reports on the market. Later when the market moves against their anticipation, they use the ELSE clause of their anticipation. EWI said payback time for bears that held through... and two days later $SPX is 70 points higher. Now that is service!

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  10. Wave IV is coming... with VIX and VXN prepare to take off

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  11. What's funny is how on a historical day for the DOW (a component goes bankrupt with the potential to further damage the economy), the index break out! this is complete madness we're witnessing.

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  12. Thanks Dan! Your graphics and commentary are brilliant.

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  13. Huge negative divgence... This market is going down (WAVE IV)

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  14. whats crazy is people adding shorts and seeing bearish outcomes when the SPX just made a new high for the year, arguing with the market is not the easiest way to make money

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  15. You cannot blame people for shorting the market. Fundamentally, its completely whacked. SPX is now trading at a trailing 4 qtr P/E probably over 65.

    Thats never been done before. Whats going to turn the economy around? More debt?

    The market will go higher, yes, but it deserves to be very very low.

    P2 must play out first.

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  16. Unless I'm misreading your charts, the last two corrections ( blue B and red X) were triangles. Not impossible ..just unlikely. Counting this mess is a low probability exercise IMO. Is it possible to count this as a five wave up A of P2?

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