Wednesday, August 19, 2009

SPX 8-19

Wow. That was an impressive stand by the bulls today. Given that China tanked last night and a double digit decline in the minis prior to the open, I believe many folks believed we were going lower, including myself.

I can't say this was completely unexpected though because there were alternate wave counts out there calling for this extended correction. Dan's call for an X wave corrective to extend this MINOR B proved to be correct. So though it was not a top two alternate count for me, it was something I was aware of nonetheless as I mentioned yesterday.

In the end nothing has changed for me. All my counts remain the same.

Below I highlight a few things that indicate to me that we may likely see a leg lower tomorrow. Of course it goes without saying nothing is guaranteed.

1. The corrective move labeled xyz appears to be complete. Each wave has a nice Fibonacci proportion to the overall structure.

Wave W retraced iii of (c) 50%
Wave X retraced W 78.6%
Wave Y is just shy of Wave W x 1.618
Wave XYZ retraced iii of (c) 78.6%

2. Price has not made a new high in a week. There are two lower peaks since the 1018 top.

So even though there may be bulls out there to buy these dips, is this indicating that we are running out of buyers? I believe this trend will continue in the near term.

3. MACD has been showing a descending trend since mid-July. Lower highs have been contained within a descending trend line.

At today's close, the MACD is looking to kiss the descending trend line once again. Will it bounce and turn lower like it has previously done in the past month? I have highlighted turns in the market with the green arrows that correspond with those turns.

4. The alternate count remain the same as well because wave xyz retraced iii of (c) 78.6%. This still falls within the guidelines for a wave 2 correction.

Arguments for MINOR B's completion:

1. MINOR B retraced MINOR A 23.6%. Though this may be a small retracement, it may technically be enough.

2. MINOR B is just shy of 1.618 x MINOR A but that would be a satisfactory length per EWP.

I will say this action must be frustrating for the bears. I wonder how many are on the verge of jumping on the bandwagon. That will be a nice tell.

Looking forward to tomorrow's action.


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