[Update 8:45 PM: This revised squiggle count on the banks is actually very nice I think. It failed to hit its target box but the banks is one sector that does not necessarily hit the blue box. They are the failed sector in fact they haven't barely retraced 32% from their drop from the 2007 peak. In any event, if there is further upside moves, the blue box is the target area.]
You can see they are setup for a third wave down.
[Update 8:20PM Technically speaking, the financials are in a precarious state. Having retraced the least amount pretty much of any sector since their early 2007 peak, you can say they are the bear market leaders and should remain so until the entire bear market is over (or at least through P3). Indeed the banks bounced at major support and at their 200DMA. The two are drawing together. They also backtested their 50DMA today and the channel line from underneath.
They have a head and shoulders pattern. A simultaneous break of the 200 DMA and major support at the pivot is not good for the overall market if it happens. BIDU might be a wonderful buy at $500 (sarcasm) but if the banks can't keep it up, it won't matter.
I mean really, the whole chart is setup perfectly for a great bear plunge on news that might just give them a push. Which makes me wonder if it'll actually follow through when we expect it or will it deal a cruel delay? Well we'll know tomorrow some more clues huh.
[Update 7:07PM: Not only did the bulls get cold water slapped in their face bringing them perhaps back to some reality of the dire situation in the world, but the rate hike came at perhaps the most the market has been extended upwards in a short term overbought for quite some time. It is only sitting just above major resistance and a drop beneath the 1104 pivot will again create huge problems. This extended rally was on lower volume than the bear moves down from the 1150 peak. On top of this there exists over 6 points of SPX open gaps that the bears would like closed.
The SPX 15 minute has a nice look to it. There are probably 2 ways to label the triangle. The move out looks like a thrust and was meant to shake out bearishness and create serious doubt and pain to bears.
The triangle apex point of course I painted it conveniently at the high . Also the channel is a nice indication that this was just a zigzag rally up. The (c) extended 1.38 times (a) using price highs and lows.
Lastly, the 1108 high is where the 50DMA resides (1108). So we can say that the SPX tested the 50DMA finally.
Its nice to see the futures bearish, but I suppose nothing until the money is in the bank so-to-speak. As I said in comments I am a believer in what Robert Prechter says that the FED is part of the market and their actions are part of the waves. It makes complete sense to me. How can we count the waves otherwise?
I will also suppose that perhaps the FED has a bullish trick up their sleeve for tomorrow. Maybe an uptick rule change. My point is, if the market is meant to make a new high it will. If not, then it won't no matter what they announce. I live at peace thinking this way even if I am wrong in thinking it.
The main point is that EW theory is based on social mood and social mood cannot be "altered" with policy actions by the FED or the bloated government for that matter. They like to think they are in control but they are not. Even the FED member Hoening the other day http://globaleconomicanalysis.blogspot.com/2010/02/three-paths-forward-kansas-city-fed-on.html stated that if the Congress couldn't get spending under control, the market would force them. In my estimation he implied the market is bigger than all of us. That was a telltale admission I think.
[Update 5:47 PM: Dollar action going on. Broke over near-term resistance. My count supposes a 1-2, [i]-[ii] which means a "blue box"-type area should be created soon (a small area of little to no overlap prior or after). The alternate is that this is just a wave 5 (or [v]) up.
Having fun with squiggle counts on BIDU. I was generally looking for a small squiggle up 5th wave and perhaps that is it.
[Update 5:27 PM: The Wilshire averaged about a 62-73% retrace rate for minute [ii] waves in P1. This wave has retraced 64% which is as aggressive as the Minute [ii]'s that occurred in P1. It has stopped under the next resistance bar.
Time-wise, as I showed last night in this chart http://2.bp.blogspot.com/_TwUS3GyHKsQ/S3yNK5XMgaI/AAAAAAAAD_8/tGD_GcflKao/s1600-h/djia.png the time ratio between Minute [i] and [ii] is very ideal. In fact I suggested an afternoon high which is what happened. The angle rally up is very steep and the market is overbought on the hourly. The internals were not that great today and on the sluggish side compared to the previous 2 days and indicative of a wave five-type move.
The McClellan's stopped at a nice line (black one). It is certainly not oversold anymore is it!. In fact it is more overbought than at the recent P2 top. I guess the theme here is that this market can drop very far before this gets oversold again as deeply as it has been getting.
[Update 4:51 E-minis already shows a nice 5 waves down.]
Pretty much everything hit its targeted areas today, even JNK covered a gap down area.
FED rate hike, futures corrected down a bit. Says "they are not tightening" LOL! They want banks to get their junkie fix from the market. Good luck.
Social mood has affected the FED. There has been some dissension in the ranks of the FED. They have pimped the big banks long enough. This is just the beginning. They have trash on their balance sheets. There won't be any political goodwill to do anymore "emergency" bailouts yet again. Americans would just as soon see the rotten system come unglued. That is my opinion of course.
Lets see if banks can stand on their own. If this is P3 as we surmise, the answer will be no. When they come begging again, the populace will revolt.
Lets see how much appetite for risk people have.