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Saturday, November 28, 2009

Squiggles and coming Monday

The market internals were very bearish on Friday with the advance/decline volume ratio ending about .04. Its remarkable though that even though Europe was down some 5% from from its late Wednesday highs to its early Friday lows, the DOW lost much less and closed the day only 1.5% off the mark.

The SPX produced over a 5 point gap down and in fact the first 2 minutes saw some 23 points whacked off the index. But it bottomed at support within minutes and sharply climbed the first half of the day.

Yet the market internals were so squashed that even by end of day they had very low readings. And that would suggest Monday was going to be an up (or the very least not a big down) day to help relieve those superbearish readings. The squiggles supports that view.

And the big untraded gap area is a bull target.

On Friday's update I gave the count on the chart as a very bearish series of 1,2's playing out.

This super-bearish count could still be the case even if Monday shakes out in a rally upward in one last ditch attempt to keep it all floating. The superbearish count probably cannot occur from such low market internal readings just yet. So another day of consolidating may be in play prior to the real King King move of a third wave down. And it may want to challenge the big gap down area first.
Bullish Count:
The chart below supposes that the bulls have not yet had enough of P2. This count is the triple zigzag from the March low and Friday was either the B wave low I have been talking about or it will occur sometime this week a bit lower.

What count do you prefer? Super bearish (P2 topped) or bullish (Friday was a B wave low) or somewhere in between (more downward correcting to come in time and then a move to new highs later down the road)?

Its a strange market at the moment. I watched BIDU trade at $425 in premarket Friday (I had covered in premarket) and rally out the gate to finish almost back even at $441 near where it left off from Wednesday even though market internals were bloody at the end of day. The qqqq's bounced pretty good on Friday.

Amazon is still above $131 and the SPX closed above 1090. So all-in-all, the price action is bearish (wild price swings in indexes at a rally high) yet the actual prices themselves have managed to maintain very well indeed. The DOW got "hammered" out of the gate yet its still at 10,310!

Two markedly bearish downturns within last 6 days yet they produced no horrible prices just yet. Still solidly in the "trading range" rotating around the 1100 mark.

I suppose I have my eye out on all three options yet lean way more bearish and am positioned bearish because sentiment went to where I expected it to go:
I am willing to give up the Minor B wave of a triple zigzag count but I haven't had a need to give it up fully yet because it has yet to be disproved.

Also its just more risk in my opinion to be on the long side at this stage of an 8 month mega-rally.

By end of day Tuesday we'll know a lot more obviously. Even Sunday night will reveal some clues:



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