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Sunday, March 29, 2009

Here is the Bearish Option

Ok I promised a bearish option this weekend and an alternate count. The bearish option is that my count on Thursday calling the top to wave 1 based on an ending diagonal that played out on Thursday holds up. The market then gapped down Friday and traced some "rope-a-dope" waves that looked like "threes". So I suggested that perhaps end-of month window dressing means that it was not quite finished its last few ending waves.
However, someone mentioned that window dressing actually ended Friday because the books were closed for the quarter then so maybe I have that assumption wrong that it lasts through the end of month. I just am not that knowledgeable on that stuff.

The CPC is also heading back upwards which usually means stocks will follow down. So I failed to mention that was also bothering me. I don't have a move down other than to 804 based on Friday's waves. So for this to be a wave 2 deep correction, perhaps we are only seeing the opening stages.
But I thought I'd post this /es minis chart which includes A/H's. Sometimes looking at things in a different light adds credibility. The ending diagonal is not perfect by any means, the wave 2 is supposed to retrace deeper. That could be the deal breaker perhaps. The ending diagonal wave 2 only retraced like 24% and guidelines say it should be 66-81%.
Thats the best I can do for a bearish option is by saying my wave 1 top call on Thursday will hold true and looking at this chart, that could very well be the case. I would guess that if this is Wave 2 down, I think the gap at 768-772 gets closed at least soon enough.

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