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Friday, September 25, 2009

Elliott Wave Update ~ 25 September

A new low today. The SPX has retraced the maximum amount just about at 1041 for the alternate Minute [iv] scenario. It cannot cross 1039 where I have a potential Minute [i] top occurring.

Regardless, the Fibonannaci retracements back up align very well with key resistances. They would likely have to gap it up Monday and run with it to try and regain 1060 level.

I give the bulls the benefit of the doubt for Monday's opening because the E-minis, all hours shows positive divergence on stochs and MACD and it aligns with a wave (ii) retrace and works very well on the squiggle count. Don't fall in love with that though because P3 will wipe out the positive divergences as much as P2 wiped out the negative. We'll see how Sunday night and overseas plays out and such.

But here is what I am thinking for Monday: They gap it up and gun it hard over 1054 resistance on Monday and make a run for 1060 breaking some stops and try to regain 1060. It then gets smacked down hard by the bears who pile on at 1060 and bulls unload and we then get a hard reversal busting downward through 1041 support zone and a nasty little selloff occurs.

Well that's what would fit my wave scenario for the squigglies anyways and would mark a wave (iii) scenario down.

The bottom line is the indexes are at a critical stage for the bulls come Monday. The markets are on the verge of confirming at least an intermediate trend change and the bulls must reverse the slide come Monday to keep it from happening.

The VIX jumped up a bit more today, so it appears their is real fear occurring underneath the surface. Speaking of the VIX it has tried and managed for many trading days to keep the downtrend intact by not allowing the 20DMA to make a bullish crossover on the 50DMA which hasn't occured since the Intermediate (5) down in late February.

However it is at a junction where it is almost inevitable. That crossover would likely coincide with a wave (iii) down and help the VIX break over the wedgeline it has been trapped in for a year.

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