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Monday, November 23, 2009

The Bearish Case

Curiously the price action seems to be forming and obeying a channel. Also my research on "wave 2's" and that they often target the "point of recognition" (often a gap down). The market did just that today yet the SPX failed to squeak a new high.
As many of you know by now, Robert Prechter of Elliott Wave International said he "seen enough" in today's market action to recommend to go 200% short. Now mind you he reminded his readers that there is of course risk involved in doing so.

To be clear, I am not making any investment recommendation as I am just reporting what Prechter said. Because after all, I really don't run a trading sight here per se. I am just a blog stating a daily opinion and posting pretty charts. Due diligence on each's part is required.

Say what you will about Prechter, a 200% leveraged short position by a man who once won a big time trading competition is not to be ignored.

[NOTE: Lets not get into a mindless Prechter-bashing session or I will remove your comment (and ban if its persistent abuse of the comment board in general). And besides, believe me, everyone has heard the Prechter bashing all before and its gotten boring to tell you the truth. If you want to bash Prechter go find a board that supports it. However, thoughtful comments even if critical, if done in a constructive way, are of course welcome.]

I merely want to entertain what the chart would count like if the market has indeed topped. Thats the real purpose of this post. The attached chart presumes P2 has topped.

I was watching the tape today from the open and the bear count presumes that divergence happened at today's DOW high with most of the rest of the market. The market open printed a 60-1 open which doesn't happen often at all. But then curiously the market dropped steadily throughout the day and ended much lamer than the open. So from that perspective it is curious price action even if its low volume holiday trading. And of course the huge gap up which is still wide open...

The Wilshire count pretty much supposes that P2 topped if Prechter is correct. Its not my primary count at the moment for reasons I have been mentioning off and on lately (sentiment, wave structure, gold, dollar, time, VIX breakdown, etc)

But, I do however favor more coming market weakness, perhaps severe, coming in my Minor B of (Z) count. So basically I am looking for a [c] of B of (Z) down to lower than 1087 and likely a good bit lower actually to major support at 1075 or 1065ish to fill the open gap. Perhaps its already started. My daily update charts tonight show my count.

But again, price action is very curious and the CPC reached a very low extreme today. So in that respect, evidence of the sentiment extremes I mentioned are perhaps in the process of occurring and I seriously consider the P3 in progress count. I don't have access to up-to-date key market survey sentiment data so for all I know that has turned sufficiently bullish also.

There will be more dots to connect tomorrow.
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