In the midst of the chaos of the above chart, an important piece of info was given to elliotticians. The move from 2:30 pm low looks like a 5-wave structure.
If we step back
There are enough waves for and a-b-c correction from the low of November 2, and, as such, a day trader could short the 5-wave complete spike with a tight stop, and cover into the close.
This is a 15-min chart
Yesterday, I pointed to the down channel and said
If it breaks out of the channel, it may accelerate towards the 1053-1069 target that I discussed
Index stopped right at 1061 pivot, and headed down into the close.
Now, the question is whether we have seen the end of wave 2/b, or is this a-b-c just the internal wave A of a larger wave 2/b correction. I don’t know the answer. We just have to wait and see. Same operating parameters as before: 1053-1069 is my target for wave 2/b. Close and above 1090, I think the dynamics of the price structure will positively change, and bears may start feeling real heat.
This is a 60-min chart
Bears need a little bit of push to solidify their case. Any sideways, chop-chop tomorrow may indicate that wave 2/B is not complete and may be followed by another push up. internal wave structure may tell us what we are dealing with tomorrow.
A couple of days ago, I showed a daily chart of VIX and said that it was at long term resistance and might ebb back
Well, it has ebbed. Notice it is right at broken uptrend line. So far, its behavior has been as expected and in tandem with general market activity.
Bond behavior, however, is making me pause and wonder if we are indeed going down like perma bears advocate
Junk bond ETF that I follow, HYG, has broken a trend line but is so far holding well
Same with better junk as ETF’ed by LQD
Most interesting of all is the behavior of US Treasuries
TLT’s chart does not look good. I guess Bernanke has stopped buying bonds. I read here and there that there has been growing tendency by the general public (a.k.a aggregate retail) to shun equities and go into the bonds. The above chart has quite a bit of work to do to turn things up.
This is a chart of US yields
Benny should start to quantitatively ease himself again, and maybe faster, for long term rates are showing signs of hostility. But look at the 3-month rate! Money’s so cheap, if you can get it from the print shop that is.
The above chart would be a well-connected banker’s dream. Get the paper at no cost, and lend it at higher rate into the future. But well-connected bakers are not lending. On one hand, to whom should they lend? On the other, why bother with 4-5% over 30 years, running the risk of rising short term rates, while one can flip oil and gold and shares of YYZ for 10-20% gyrations a month?
For the day, volume was about average. Breadth was negative
McClellan Oscillator has been trying to get out of the dog house
On October 30, I showed a chart of S&P’s momentum cycles and said
CCurve is at a critical juncture. It is sitting on its uptrend since July. I will regard a break of that trend line as a second piece of evidence for magnitude momentum swing failure at the recent price peak, and may plan to get more aggressive on the short side. If it turns and make a higher peak than the last peak before making a lower trough, I will regard it as an indication that another momentum up cycle may be in the works, and may become wary of the short side.
This is an updated chart
CCurve broke the uptrend line. Now the question is if it can turn around soon and start another momentum cycle as it did in July. As long as index stays above 1018 pivot, it has a good shot at consolidation and gathering energy to start another swing up. A break below 1018 gives bears a very objective level to play.
Let’s Wrap Up:
I am operating under the assumption that a top is in, expecting an OEW mid-term trend change. Technically, everything that I look at tells me that, at the very least, a good size correction in underway.
It seems like market has been trying to firm up its short term internals. It is important for bears to take the index below 1041 and, especially, break 1018
A move towards 1090 (and above) may positively change market dynamics
Support is 1041 and 1018. Resistance is 1061 and 1090.
Short term trend is down. Mid-term trend is up. Long term trend is down
Have a Nice Day!
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