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Thursday, November 26, 2009

E-minis (Thanksgiving Edition) [Update 9:10pm]

Nasty and Europe hasn't even opened yet. Broke support.

A super bearish NASDAQ count below. Its of course assuming the P2 peak is in for the NASDAQ. The key of course, once again, is to see if a 5 wave move down at Minuette (pink) occurs to form a proper Minute degree wave [i]. We've been through this drill before and the last time it happened, the markets had what appeared to be a 5 wave move except it was, well, a bit odd in many ways. And of course it proved not to be Minute [i] because the 3 major indexes went on to rally to new highs.

I've also taken the liberty to assume this NASDAQ orthodox peak was truncated.

As an aside, the E-minis went on to make a squeaker new low and it may mark the e-mini low for now because its counts pretty decent as a 5 wave move down.

Seems to be working on a 5th wave down. The green resistance line will be very tough for the e-minis to get back above near term in any bounce. We have the advantage of seeing how Europe will react a second day after closing on lows and down over 3%.

As many commenters have pointed out, the eminis makes a nice "triple top" formation.


[Update 12:16pm] - The sentiment surveys I linked just updated. Bullish extremes are being met.

http://www.market-harmonics.com/free-charts/sentiment/investors_intelligence.htm

Happy Thanksgiving!

Well I think a triangle option is out. Unless futures recovers somewhat, and they very well might a bit, its gonna be one interesting setup for Friday's market open. At this moment your looking at a 20+ point gap down on the SPX.

Huge gaps down are big bull targets. If a huge gap down were to remained largely uncovered, it would be a thorn in the side of both bulls and bears and keep 'em guessing all the way down. Its going to be an interesting open indeed with a partial market day Friday and lower than normal volumes.

As we seen last month the SPX decided on the last day of the month of October to reverse a previous 8-1 up day and turn it into a 90% down the next day and finish the month under the monthly 20 moving average. It was very bear friendly move. A monthly close above this average (which is the midpoint on a standard Bollinger Band setup) is considered very bullish long term by market technicians.

For the SPX to close under the monthly 20 MA it would require a move in a day and a half to under 1041 SPX. That would mean Friday and Monday would be a, well, one hellava nasty down day(s). Thats over 6.5% down from the close on Wednesday.

I will say that the VIX, dollar, Gold, oil, banks, etc, etc have all sufficiently produced enough movement to satisfy any EW counts. Of course the secondary markets all still show great weakness and divergences such as RUT and others. Even the QQQQ's show a lot of negative divergence particularly the weeklies.

And as far as sentiment goes, EWI produced some nice bullish numbers in last night's Short Term Update to satisfy that requirement as has other websites produced some nice bullish readings. And I'm waiting for this to be updated ( I really need to join a daily sentiment service I think)


[Update: 12:15 - its updated and as you can see, its peaking for P2 in many areas.]

The "catalyst" for today seems to be Dubai. Everyone has seen those emails that were circulating the last few years of the palm island luxury resorts and the indoor ski slopes. It all seemed so surreal the opulent things they were building. And they did it at the peak of luxury and asset mania. I guess they weren't so smart after all. Even the super rich will be frugal in the bear of all bears.

At any rate, as I explained last night in this post
I did expect a pullback in a [c] wave of B of (Z) and was entertaining a low anywhere from 1098 to 1060-1075 area. The middle range 1086-1088 would have produced a B wave flat. With the severe selling going on in Europe and futures down huge, I question if that area will hold. In fact the pivot on the e-minis is being challenged as I type.

I will also remind that the last time I thought a B wave was playing out in June and that the market would head up, it never happened. So I naturally question my current count. And Prechter said to go 200% short, and that I have to respect.

So what am I saying? I am saying I am ready to abandon the thought of a Minor B wave (and hence the triple zigzag count altogether) because I have a particular habit of pushing for that one last push when its not really there. It remains a possibility but after the market spoke today in the overseas venues, its hard to ignore a 3% drop that ended on the lows (Europe). another bad session on Monday and they will close under the monthly 20 MA.

And the thought of a drop to under 1041 by Monday's close is just too "in your face" to pass up.

So we'll see. Minute [c] of B down or is it really (iii) of [i] of 1 of (1) of [3], or P3?

Or will we see a nasty selloff to almost 1000 over the next week(s) only to slowly recover in a new squeaker high later in early January? Afterall in the summer of 2007, it appeared all was lost yet it rallied one last time to the October 2007 peak.

So either way its interesting times we live in. But I am still bearish as hell overall, just trying to be patient....I still have this chart as my overarching count:

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