S&P 500 - June 11, 2009

charts courtesy of stockcharts.com

Another attempt at 950 was met with selling.

There was a a ver clean EW trade on the index today

Different traders have different styles. In the trade portrayed above, I am really pleased with the fact that I did not go long after the breakout following the conclusion of wave 4. Some traders take it, I ignored it because wave 1 was very small and with index lacking momentum on larger frames, I thought it would be very likely for wave 5 to equal wave 1 (if not less). So I stayed pat. At around equality with wave 1, I went short with a stop above my 961 pivot. The rest is standard TA and explained on the chart.

Sometimes, we get them right.

Index again failed to hold 950


There was serious selling of the ETF into the close. Is the rally finally over? We can examine some possibilities.

Variation 1: in Search of Major C = Primary B

Variation 2: in Search of Intermediate C = Major A


Same count as the previous one but one degree lower

Variations 3 and 4: same search different complexion

Here, I have changed the wave degrees to account for better symmetry, but the end result of the count is essentially the same as I have been posting on a 60-minute charts

Bottom line is that we are probing for a top. As far as Elliott Wave is concerned, we have enough waves for a complete set. We also have diverging momentum and breadth. Technical conditions are in place. But the question is: are the buyers ready to sell? In other words, are we going to make lower lows, or is an extended wave in the cards?

I don’t know the answer to that question. What I know is that if the high of today was the end of a wave 1 of an extended wave set, then its beginning should not be violated for quite some time.


In the chart above, if 928 is violated then wave 1 scenario is tossed.

Of course, there can be other configurations, but I think that’s enough for now. So, I shall keep the 60-minute counts above in mind, and wait for a break of 928. If it does not happen, I shall be either out or scalping the long side above 950. If it happens, then I’ll start slow, give myself a wide stop, and get aggressive below 910-915.

As to whether the impending top is the top or a just a pause before more upside, we may get our clues from the way waves unfold on the downside.

That comes later, for now, let’s keep the agenda small and await a break of 928. If index powers on above, I will re-examine, and draw new plans.

For the day, volume expanded, but stayed below average. Breadth was positive.




The negative divergences persist. The index has so far failed to stay above 950. But, buyers run this asylum and it is up to them stop buying and/or start selling.

To Wrap Up:

Index made a new high for the rally, but for a third time in 4 days, it failed to stay above 950.

Index has maintained its positive posture. We seem to have a complete wave set from March lows, but the possibility of wave extension cannot be ruled out.

A break of 928 may signal an end to this rally

A move below 910 can shift the technicals of the index to the negative side. A sustained move above 950 can send the rally into overdrive

There is a serious negative divergence on McClellan Oscillator.

I do not want a new long positions in here (I may speculate the long side above 950). I do not want to take unhedged shorts home in here either. Trading and hedging is the name of the game until further notice

Short term trend is up (it’s been up since May 18). Mid-term trend is up. Long term trend is down

Resistance is 950 (pierced and lost three times already), and then 961 pivot (a long term level from 2003). Support is 935 (Jan 2009 top), 920, 912, 900, 875-885 (neckline and base of a W bottom) and the frequently contested 850

Bears do not matter at this point. Market needs new bears with capital and conviction, watch for signs of distribution to see if buyers have turned or not. I still believe that as June progresses, pressure to join the party may increase on fee-collecting managers who listened to Roubini in March and missed the rally.

There are divergences building in momentum and breadth, but price issues the final verdict, and price has been very resilient so far.

Bulls need a series of closes above 950 to at least consolidate their gains

Some financial institutions are about to dump a whole new round of shares. I have not seen news on the subject. If anyone knows of any info relating to share offerings by financial houses, please let us know.

Next Week, options expire.

Have a Nice Day!