I got out of my shorts Friday at about 1043 and went long with some in the money October calls. I'm now looking at 2 (or 3) possible scenarios...

One is that this current move was wave 4 down from the 1080 high (with Wave 1 up starting at 978 low), and that we are getting ready for wave 5 up (to the 1108 gap fill area) to start on Monday. Here is the breakdown...

Primary 2 up is of course from the 666 low to now, and currently undetermined if it has peaked or not?

Inside P2 we have...

Wave A up - 666 to 956 = 290 points
Wave B down - 956 to 869 = 87 points
Wave C up - 869 to present (if ended at 1080, then that's 211 points)

Inside Wave C of P2 we have...

Wave A/1 up - 869 to 1018 = 149 points
Wave B/2 down - 1018 to 978 = 40 points
Wave C/3 up - 978 to present (if 1080, then 102 points)

Inside of that Wave C/3 of larger Wave C (from 869) of P2 we have...

Wave 1 up - 978 to 1039 = 61 points
Wave 2 down - 1039 to 992 = 47 points
Wave 3 up - 992 to 1080 = 88 points
Wave 4 down - 1080 to 1041 = 39 points
Wave 5 up - 1041 plus 61 points equals 1102.

That 1100 mark is the key for the bulls. The mark is somewhere between 1100 and 1108, depending on what time scale you are looking at, and whether or not you're only counting the closing price or the intra-day peak.

Inside of this 5th wave up I'm thinking we could have an ABC to that 1100 mark, or even a 5 wave move. Regardless of the wave pattern, I'll be looking to short once that 1100-1108 area is hit.

The other scenario is that 1080 was the P2 peak and this was Wave 1 down in a larger Wave A/1 that should find a bounce around 900 or so. If that's the case, then we should still be up the first couple of days next week to form a Wave 2 up. Resistance is at 1053 and 1065, and should provide another chance to go short.

I believe that if it stalls at that area for a day or so, like having a doji, then it's not a Wave 2 up (with 1080 being the P2 high), but instead it's the first part of the final Wave 5 up to 1100 area. If that 1053/65 isn't sold hard, then it's not the starting point of a Wave 3 down from the 1080 peak, but instead a consolidation point for a big Wave C/3? up to 1100 area. BE CAREFUL AT THIS POINT!

I'll be monitoring the volume closely. If there is heavy volume at 1053/65, and it holds, then we are heading to 1100. Heavy volume should push it down hard into a Wave 3 down, making 1080 the P2 top. The Bulls have too keep it from collapsing back down from 1053/65 to take out the 1040 level and head on south to next support at 1020, then 1000.

I think that if they lose at 1053/65, and don't hold that area to close with a doji for one or two days, (which would then be viewed as consolidation, before a big up move), then Wave 3 down should take out 1040 easily and head to 1020, and then 1000, before a bounce back up for Wave 4 up.

Personally, I don't see 1080 as the P2 top. I think they will push this up Monday and Tuesday (remember.... Monday is a Jewish holiday, and there's no economic news coming out). That equals light volume - aka, easy to push up, and then consolidate on Wednesday and maybe Thursday too? They can give back a little bit from say the 1053 or 1065 push up, but they can't let it break 1040 or they will not regain control and 1080 will be the P2 top.

So, I'm thinking that they will push up to 1065 area, drop back to 1053 area, and then go for the big push to try and take 1080 again. They should be slapped back down there, which could let them fall back to 1065 for support. Then lunge one more time to break 1080 and head to 1100 area. This could be quite choppy as the bulls and bears battle it out. I'm not so concerned over wave counts, but more focused on the support and resistance levels.

There is nothing between 1080 and 1108. If they break 1080... they are going to 1100-1108 area! It's just that simple.

Friday's volume was a little over 204 million shares traded, which is still a little light, as the average should be 225-250 area. But, that's still a lot more then the 150-170 mark that we have seen on many Friday's in the past.

What concerns me the most, (and makes me think that we will go higher first), is that we had some good volume during the last 3 down days, (and... we had a lot of bad news this week), yet we only dropped 39 points. It's seem quite controlled on the way down. I didn't see it, or feel like anyone was in a panic state. That leads me to believe that those crack head bulls are still in control. (And you know that Obama, Timmy, and/or Bennie will spin anything out of the G20 meeting as positive next week).

I also noticed that when the dollar sank in the morning on Friday the markets didn't rally. It seems that the market and the dollar are starting to part ways. As you know... in the past, when the dollar fell the market rallied, and when the dollar rose the market fell.

They have been like opposite sides of a coin for the last several months now. This "de-coupling" between them could be because the market is starting to wake up and realize that a falling dollar is NOT good for the market as they previously thought.

And here's another reason to be up early next week. Let's not forget that a lot of bears went short during those 3 down days. That's a lot of squeezing for the bulls to do. Light volume on Monday... Crooked Goldman Sachs with our money to spend... Can you say Bear Squeeze?

That 1053/65 resistance could be cut through on the first try up? It's hard to tell how many bears are in the market short right now. If they do squeeze up, and go through, then the same plan applies as above... just with different numbers. The 1080 area still should stop them on a second hit. It could go up to 1080 first, then back down to 1065 for support and off to 1100 on the next wave up?

Focus on the volume! If volume is high, and the market is holding it's ground (and NOT tanking), then the bears are losing the battle and the market will go higher. Those doji days are bullish, not bearish... at least until we reach the final top around 1100-1108.

With that said... some have 1120 as a high, and others have 1200. Nobody knows for sure... but some of the best traders on floor of the S&P are calling for gap fill, then down to 900... so I'm leaning toward that as being the plan of action. Mr. TopStep knows a lot more then me, and if he talks... I'm listening! (Isn't that an old EF Hutton commercial? LOL!)

Since both scenario's call for the market to go up early next week, I'm comfortable long right now. But, I'll be looking to get out of my longs in one to three days. I'm looking for resistance levels to be hit and stalled out on, and I'm looking for volume. Then, at the point that the two scenario's take a different path, I'll have to make that tough choice to go long or short. (Most likely long until the 1100 area it hit). I'll be flipping a coin probably! LOL!

One last thing...

A third scenario that could happen is that we continue down to the 1020 support area before a bounce back up. However, low volume, (which I expect on Monday), is usually positive for the bulls as they can easily push the tape higher. It is a possible scenario, but I just have to go with the odds... which are point up in 2 scenarios and down in 1.

Good Luck and may the evil force (aka - the darkside) be with you!

Red

Weekend Update...

Since most of the other blogs out there are focused on technical, (and since I'm not an expert at TA Elliott waves, Forks, Fib's, and Astrology), I decided I do this post on my "Gut Feeling"... backed up by some evidence.

During the last 6 months or so I've seen the market break all the rules and go "against the grain"... so to speak. It should have corrected many times in the past, but didn't? Why? Well, I think we all know the answer to that... Government Manipulation, (or the Plunge Protection Team... aka PPT). Now, I'm not going to debate whether or not it's right or wrong, or if they really exist. I'm only saying that someone is controlling this market, which makes predicting it illogical.

In any case, let's look at some evidence from the past, and try to make a prediction anyway...

Did you notice all the late day "Buy Programs" that come out of nowhere when the market seemed ready to sell off? They seem to work extremely well when the volume was light during the trading hours. Many other times those buy programs happened during the pre-market or after-hours. Conclusion, in a low volume environment they clearly were able to manipulate the market up.

Recently however, the volume has been slowly increasing, which is putting a damper on the huge moves up. Last Monday through Thursday the volume went up steadily from 175 Million shares, to 195, 215, and 225, (with each day gaining less because of the increased volume). Then, on Friday, we dropped down to 150 Million shares of volume. We should have rallied up on Friday hard as the buy programs can easily prop up the market with this low volume.

But, it didn't happen? Why? Were the buy programs not triggered? Looking at an intra-day chart you can see that they were in fact triggered. But, they didn't have enough juice left in them to push it up but 2.81 points. That tells me that the buy programs are having less and less effect. It should have been up the usual 8-10 points with such low volume. Looks like somebody's very tired! Could they be running out of steam?

So, how can they push up the market higher to reach that critical 1100 mark, like they are dying to do? Can you say "Short Squeeze?" That's how they've done it in the past. They sell off to a critical support level to draw in the bears, and then kick in the buy programs to kick start the market. Once it starts the bears are squeezed and have too buy to cover their shorts. The rally accelerates just as planned... until all the bears are squeezed out.

It looks to me like this recent run up has squeezed out every last bear breathing. That's why they can't get the market to move up any higher... there is no one left to buy! Even the bulls won't buy at these levels. So, how do you get the market to move back up again? Simply... trick the bears into coming back into market with a nice sell off to a critical support level. Then, kick in the buy programs and squeeze the bears again. That should be enough juice to rally to the precious 1100 level... where the final top of Primary 2 will be.

More evidence...

Let's talk about the might dollar. Ever notice how the dollar seems to get a bid just before a big Fed Auction? It has happened many times in the past, and each time the dollar would collapse back down after the auction was over. Hmmm, does that sound fishy to you? Sure does to me... Well, guess what's happening next week? You guessed it... another Fed Auction! Only this one is really BIG! This time they are going to auction off $112 Billion Dollars (of worthless IOU's).

But, who wants them when the dollar is worth less and less each day? No one is the answer... of course! (That's why they've been secretly buying them back themselves, through 3rd party's so no one notices). So, the Government is stuck in-between a rock and a hard place. On one hand they need to rally the dollar so that the auction will be a success, and they will find buyers. On the other hand they know that a rally in the dollar will collapse the stock market. However, they also know that they have run out of bears to squeeze. Which means that they don't have enough power to push the market higher either.

So, the logical thing to do is to buy the dollar up until the auctions are over. That will also drive the market down, which will bring in more bears. After the auctions are done and all the suckers buy more worthless bonds, sell the dollar and buy the market back... creating another short squeeze on the bears. The market will then rally again. It's a Win Win deal! Problem solved... correct?

Well, at least too me it seems so. I don't see any other way to rally this market higher without bears to squeeze. The Friday action clearly shows that the buy program failed to rally the market much higher. They can't buy the entire market themselves... at best all they can do is light the fire to get a rally started. They still need buyers to come in and continue the rally higher. Those buyers are reluctant bears that are forced to cover. The bulls aren't buying at these levels.

That means that there are NO willing buyers. So, you have to force someone to buy, (aka... the bears)! I truly think that this is their only option. They must buy the dollar. It fact, I believe this support of the dollar already started on Friday. Notice on the intra-day chart of the UUP the HUGE Spike in Volume at the close. That's 3 1/2 Million shares! Was that a buy program? I think so... and I think more buying will happen next week. Which will tank the market. Then, come Friday, the buying ends!

The following week they will push the dollar back down, which will strike a match to the market, and the fire will start burning hot again! Look out 1100... here we come! Talk about pain! Let's slap the Bulls in the face and tease the bears with plastic fish!

Bottom Line...

I think the market will correct down all of next week, and should find a bottom at the 102 SPY area, or the 99.5-100.00 SPY area. Whichever it's at Friday should be the low. The following week should rally back up toward that 1100 area. Needless to say, I went short Friday, and will go long this coming Friday... assuming all this guessing is correct?

The other possible scenario for next week is to go down on Monday to 1040, then rally Tuesday, Wednesday and Thursday to 1100, and finally sell off on Friday... starting P3 down. I think they would like to be able to control the market in that fashion. But, I just don't think they have enough juice left to push that high without more bears to squeeze. The bears have been burnt so many times that many of them are hesitate to jump in. So, that makes me believe that more support levels will need to be broken before there are enough bears back in to squeeze hard enough to reach 1100. I don't think one down day to 1040 will make enough bears jump in.

Although in the past 30-40 point rallies could be achieved over several days with light volume, that last hurrah to 1100 is going to be up against normal to heavy volume next week. Pushing 30-40 up in that kind of volume will be extremely hard too do without other buyers. So, even though the market is so close to 1100, I believe it will be tougher to get that last few points then the first few. That's why I favor the "down all week" scenario, instead of down on Monday and up to 1100 by Friday.

Think about a marathon runner in a 100 mile run. Those first 50 miles were easy. Then, you need a to take a break for a little while. You then regain your strength and push on for another 20 miles. You take another break as the toll on your body is hard and it's a real effort to keep going. So, the next push is only 10 miles, before you need to take a break again.

Looking back... that first 50 miles was easy (the March to mid-May run up), and that next 20 miles wasn't too bad (the early July to mid-August run up), but this last 20 miles seems harder. Why is that? The first 50 was easy. Could it be that you are running out of energy? I think the market is too!

Again, this is not technical analysis, but instead just some hypothetical predictions based on what I've seen in the market over the last 6 months. Of course I could be wrong and they snort that last bag of cocaine up there nose, and 1100 here we come! However, I just don't think that's possible without a decent size pullback. That end of day buy program in the s&p is a big sign telling me that they are out of juice. Couple that with the huge volume in the UUP in the last 10 minutes of the day, and that says too me that they need to crash before taking another hit of speed to get high again.

Red