S&P 500 - April 22, 2009

some charts courtesy of stockcharts.com

The day started with a whipsaw that I covered in more detail in my previous post, and then we had a vertical rise

Some divergence appeared late in the afternoon and S&P declined sharply into the close.

This the 60-minute chart of the June contracts, one of my road maps

This is the cash index counter part

As I mentioned during the day, price tapped the underside of the broken diagonal lower boundary on 60-minute cash index, and worked its way up briefly inside the diagonal on the 60-minute June contract chart. It then rolled over, this is all very typical and text book clear so far.

Now, cash index is back at the lower boundary of a channel I have drawn in red. It rose to the center line of that channel and dropped fast to the lower boundary. That failure at the center line is a sign of weakness.

If this count is correct, I expect a simple zigzag for major wave B. But we should remember that a wave B can unfold in many different corrective patterns.

If we are dealing with the second down leg of a zigzag, it will unfold in a 1-5 wave set, and, as such, the high of today must not be violated. If it gets violated, we are dealing with something else – I’ll worry about that when it happens. For now, today’s high of 861.78 on cash index is a must-hold.

Market does all sorts of tricks to make us doubt ourselves. It is up to us to re-evaluate our plans and see if we would like to maintain the course.

So far nothing has happened to force me to entertain a change in my wave count.

In fact, the action today has strengthened my case, and brought my overall stop a bit lower (the high of today). S&P dropped like a stone into the close, which is very different from a few days ago when the rally was in full swing and people would buy into the close.

Volume came less than yesterday. Breadth was mixed.

You know, despite all the verbiage that we spend on intraday moves and all the talks of bearish this and bearish that. If, as an unbiased technician, I step back and look at the two charts above, what I see is a strong up move with broad participation. It is doing a prolonged topping, rounding ever so slowly on momentum and breadth, and hanging in there.

the danger for a bear is to over estimate his hand, play for a deep correction, and get killed by a shallow pullback.

It will take a lot of selling by a lot of vested interests to force this market into a collapse. Anything can happen, but, at this moment, there is no technical evidence that the doom is pending to happen tomorrow, but that's only charts and probabilty models,

We had a slight MACD cross today. DOW and NAS100 had already had that, and S&P was the odd man out – just an observation

Nas100 was positive for the day. I don't read anything into it, but worth watching

Current count is valid as long as price stays below today's high (861 on cash index, 859 June contract). if price moves beyond there, then I will have to re-evaluate

I have a ball park target for minor C = Intermediate A at minor C = minor A = 815 on the cash index, 811 June contract

Short term trend is up. A break below Monday's low (825 cash index or 822 June contracts) will change that, and very likely cause a lot of concern among the bulls.