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Saturday, September 5, 2009

....The Bearish Squiggle Count and Ramblings

Yesterday I took the NASDAQ 1 minute chart squiggles and formed a more bullish count based on a series of 1's and 2's and then the tops of the 3's and 4's and 5's waves would play out on Tuesday. The count looks nice and has much going for it however I still have it as an alternate count. The key to this bullish count is that upper support holds. I estimate that to be above 1997 in the NASDAQ and above 1007 in the SPX. Make no mistake, the bears will try and smash the market back down under that hard-fought area (recall the battle in premarket over the jobs report).

The bulls would like nothing better than gap up and over 1016-1020 resistance and gain it back as support and hold it to be able to stage an advance higher for the rest of the week.

Today I take the same NASDAQ squiggle chart and present the bearish count (which I consider my Primary count). There is also a lot going for this type of interpretation:

1) The 1:1 price ratio of a double zigzag count is uncanny so far in all three indexes.
2) The end of the day formed a triangle and triangles indicate that the next advance after the triangle is the final actionary pattern in the structure.
3) The e-minis actually show a little mini-wedge move after the triangle. Then the price fell back in the A/H's.

To be sure counting squiggles can be dangerous, but EW theory encourages it and I just like to do it.

Friday's SPX cash volume was the lowest since December 2008 I believe. We all seen how they ramped up the indexes in the low-volume December time frame. When real volume came back, they sold it hard. I am betting the same will happen here. The "big boys", post summer vacation, post-holiday, will come back and pull the plug on prices.

Is the SPX cheap?

At any rate, my bets are smallish at this point (I did take half profits on the move down to the mid 990's). I have been waiting for September 5th for all summer and now it is finally here. Its just like the market to "set itself up" at a cross-current count at a key juncture and fill players full of doubt both ways. Its only fitting.

I don't even think the market is sure what it wants to do, hence the waves at short and medium level are a "mixed" bag. The move down from 1039 to 991 counts probably just as well as an ABC type or double zigzag.

The VIX weekly is a huge shooting star and they did manage to stuff it back in the giant falling wedge. However the VIX daily will likely have the 20 DMA cross the 50DMA in the VIX early this week. That hasn't happened since February and the 50DMA shows signs of flattening out. Fear is slowly building back up it would seem. The VIX weekly is finding its momentum. However that does nothing for us for certain this coming week does it?

Well, I think you get what I am saying. The market is at a major crossroads. Will it manage to squeeze more upside for the next few weeks and totally break the bears will to fight? Or will fear come back in at a rapid pace? Will the dollar break down further?

It comes down to two powerful emotions: Greed and Fear.

And its a winner-take-all death cage steel match scheduled for this upcoming week.

Stay tuned.

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