Sunday, July 12, 2009

sell off tutorial : ))

-short term update SPX-

As you know I think the market is in Intermediate (5) down to complete Primary A/1 between 550 and 700. Thus I count the rally from March to June as an Intermediate (4) and compared it with Intermediate (2):

In both cases the rally was stopped by the EMA200. After that the SPX broke the SMA29, which provided support during the rally, and retested it shortly after. Finally the market breached the SMA75 (resistance line for corrective Minor waves) to start a new downtrend.

Bearish counts

Intermediate (5)
The market completed Intermediate (4) at 956 and is now in Minute [3] of Minor 1 of Intermediate (5). Since it's a fifth wave it's possible that it will form an ending diagonal (ED). Each subwave of an ED consists of three waves. Thus the market could make three waves down to ~800 so that everybody will be thinking: "Great! Only three waves down! The correction must be over. This time I won't miss the rally, I'm gonna sell my house tomorrow and buy some calls!". Unfortunately the following rally (Minor 2) will stop around 880 before Minor 3 will start and go way below 800.

Intermediate (X)
956 was the top of the first zigzag ((W)). The market is now in Intermediate (X) (target ~800) before the second zigzag (Intermediate (Y)) should carry the market to new highs.

Bullish count

Intermediate (Y)
The SPX has already completed Intermediate (X) and is now in Intermediate (Y). If the market falls below 869 this count is invalid.